Since 12 of Wall Street's largest brokerage firms reached a settlement with New York state four years ago under Attorney General Eliot Spitzer to sever ties between their research and investment banking divisions, the research industry has been on the decline. Many companies, but especially those small and recently IPO'd ones that so often fall in the tech sector, have complained that the lack of analysts to tell their story in the wake of the Spitzer settlement has hurt their visibility and liquidity, arguably keeping their share prices unnaturally low and cutting off access to the capital markets.

But the thinning analyst ranks is not their only problem. The remaining analysts switch jobs so often that they've created another problem with continuity of coverage.

The National Research Exchange, a group formed to help improve the amount and depth of research coverage, has issued a white paper examining the problem of analyst attrition, which remains alarmingly high, even after the post-bubble fallout of 2001. NRE said it was not surprised to see a 73% attrition rate between 2001 and 2006, since that period included the high-tech bust. But it expressed "shock and awe" at discovering a 52% analyst attrition rate in the more stable period between 2003 and 2006.

What happens to a company when the analyst who covers it leaves to go work somewhere else? NRE said that 29% of all stocks that lose an analyst due to attrition are dropped from coverage and remain uncovered a year later. And when they are reassigned, it's often to less experienced junior or generalist analysts or to those who are already overtaxed covering other companies, resulting in superficial, inferior research. —Andrea Orr 

See Deal story on Spitzer settlement
See Wall Street Journal editorial on decline in research analyst coverage