Ten interview questions you’ll need to answer if you want to work in equities

The slow death of fixed income trading over the last three quarters has forced banks to recalibrate their focus on units that can actually make them money. Equities, which has historically played second fiddle to FICC, is quietly becoming a new focal point for investment banks.

Equities trading accounted for 7.9% of total revenues for big banks during Q1, up from 7.7% a year earlier. Morgan Stanley, which just posted a 16% year-over-year increase in equities trading, was the belle of the ball during the first quarter. Equities, it seems, is a nice, safe place to work, at least for the time being.

While interviewing for a position in equities, whether on the research or trading end, expect to be asked your personal opinion on the current market, particular stocks and various strategies. Below are just some of the questions you’re likely to encounter.

1. What investment philosophy do you subscribe to and why? (growth, value, momentum).
2. You have been asked to value a company.  You have the balance sheet, income statement and cash flow statement available.  If you could choose only one, which would you choose and why? How would you try to determine what value this company is worth?
3. What do you think of the current state of the economy? What seems to be driving the market? What sectors do you favor?
4. What is the market PE/Dividend Yield/Price to book?
5. What would you do if a stock you just recommended lost 10% - 15% of its value?
6. What is operating leverage?
7. What did the Dow/S&P/Bond market close at yesterday?
8. What stocks do you own/like? Why?
9. Who is your favorite trader?
10. Tell me three major industry trends and describe them briefly.

Another good piece of advice, courtesy of Wall Street Oasis, is to actually invest in the market and in positions that you’ll comment on, even if it’s just a few dollars. “It is painfully apparent when a person is lying about a stock they say they invested in but haven't,” one poster notes.

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