Analyse This

Auditors, and others interested in the nature of scepticism (feel the irony) will have been interested in recent FT coverage of stock market analysts' reluctance to write "sell" notes on the companies they cover.

In theory, the distribution of sell, hold and buy ratings should be equal. Yet Bloomberg found that 60% of analysts' ratings are "buy", and "buy"/"hold" ratings together outnumber "sell" notes by 9 to 1.

One chief of US equity strategy was brave enough to be quoted as saying, "There is clearly a lack of willingness of management to deal with analysts who are highly critical."

McKinsey research, discussed here, has also found that analysts are "typically overoptimistic, slow to revise their forecasts to reflect new economic conditions, and prone to making increasingly inaccurate forecasts when economic growth declined."

It seems likely to be self-defeating to obviously exclude or limit critical analysts' participation in briefings - possibly a sell signal in itself. Or at least a signal that everyone should start asking a lot more questions. But ultimately the research highlights the fact that, for all the law on disclosure and directors duties, the stock market is just that - a sales forum.

Let the buyer beware.