Secondary research
Information an analyst gathers from already-published sources — annual reports, industry journals and market research — rather than collecting it first-hand.
In plain language
Most of what an analyst reads was written by someone else, for a general audience, before the analyst ever asked a question. That is secondary research.
It is the natural starting point for any research task — annual reports, industry publications, government statistics — but the workbook is upfront that it has real limits, which is exactly why primary research exists alongside it.
How it works
The workbook: analysts perform "secondary research to understand what is happening in the economy, the industry or to track actions taken by competitors." It also names the specific weakness this method carries: an annual report "is published once every year" — just once every 12 months — so the information in it "starts becoming dated with the passage of time," and it may not cover industry or economy conditions in depth at all.
A worked example
Illustrative. An analyst studying the telecom sector reads a published RBI bulletin, a telecom-industry association report and each listed operator's latest annual report, without contacting a single company directly. From these sources alone, the analyst estimates sector-wide subscriber growth of around 6% for the year — a reasonable starting estimate, but one that will not capture a competitor's tariff change announced only last week.
Why NISM asks about it
Chapter 4.2 (The role of research in investment activity) introduces secondary research directly alongside primary research. Expect a question distinguishing the two, or one testing why annual reports alone are an insufficient basis for research.
Common exam traps
- Secondary research is not automatically current. The workbook's own reason for pairing it with primary research is that published sources, especially annual reports, go stale within months of being issued.
Check yourself
1.An analyst hears three things in a week: a factory employee mentions the purchase department is busier than usual; a dealer says stock is clearing faster; and the company has advertised openings for a second shift. She combines them into a view that volumes are running ahead of expectations. This is best described as:
- a)Insider trading, because none of the three facts was published by the company
- b)Mosaic analysis, which the workbook states is acceptable
- c)Insider information, because the employee is connected to the company
- d)Primary research, which is prohibited for research analysts
Show the answer
Answer: (b) Mosaic analysis, which the workbook states is acceptable
The workbook describes this exactly: often analysts collate information from different sources, which individually may not be significant but when put together with other public or non-public information may provide critical insight. These is called as mosaic analysis. Such mosaic analysis is acceptable.
Options A and C both rest on the same misconception, which the workbook rebuts directly: it is not necessary that all such information would fall under insider information. Insider information is material non-public information that, when published, would immediately affect a buy or sell decision, judged on source, impact and certainty. A remark about workload fails on impact and certainty — indeed the workbook uses that very example to say it need not be insider information.
Option D is wrong twice over: this is a mix of primary and secondary research, and primary research is not prohibited — the workbook says analysts often have to conduct primary research including visiting facilities and speaking to customers, suppliers and employees.
Where this is taught
Free preparation for NISM Series XVRelated terms
- Primary researchFirst-hand information an analyst gathers directly — plant visits, and conversations with customers, suppliers or employees — rather than sourced from published reports.
- Quantitative researchAn approach to studying companies or markets built on statistical and numerical methods — time series, regression and econometrics — rather than reading qualitative business factors.
- Research reportA document presenting an investment idea — analysis plus a recommendation. SEBI excludes market commentary, index discussion, internal notes and statistical summaries from the definition.
- Mosaic analysisAssembling many individually insignificant pieces of information, public and non-public, into a critical insight — a practice the workbook states is acceptable.