Essay Title: 

Fundamental Vs. Technical Analysis

March 30, 2016 | Author: | Posted in health and medicine, nursing

Running Head : Fundamental vs . Technical Analysis

Fundamental vs . Technical Analysis

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Fundamental Analysis

Fundamental Analysis is the research on determinants of stock value such as earnings and dividends prospects , expectations for future interest rates , and risk of the firms . This type of analysis takes into account the earnings and dividend projections of the firm in question outlook of future interest rates , and risk assessment of that firm to establish correct stock prices . At the end of the day , it represents an effort [banner_entry_middle]

to establish the present discounted value of all the payments a stockholder will be given from each share of stock . If that value were more than the stock price , then that stock would be worth purchasing in view of the fundamental analyst

Fundamental analysts typically begin their work by studying the past record of earnings and an assessment of company balance sheets . A supplementary comprehensive economic analysis , an assessment of the quality of the company ‘s management , that company ‘s footing within its industry , and the forecast of the industry as one , is then made . These analysts essentially aim to gain some insight into how the firm is likely to perform in future with a hope that such insight is yet not attained by the rest of the market

The efficient market hypothesis holds the notion that typically speaking fundamental analysis brings little value . This is for the fact that any firm ‘s earnings and industry information are freely accessible to everyone , and therefore every analyst has hands on such information As such it is inconceivable that the assessment and valuation of a particular firm ‘s prospects , made by different analysts would vary . Many such firms that have access to timely and quality information and have sufficient finances to keep running are making this kind of market research . Due to this yet another fact it becomes difficult to believe that any analyst can unearth data that other analysts have not already discovered . If an analyst has to succeed and stand out , he or she needs to have a matchless and incomparable approach

Fundamental analysis is not only about discovering such firms that are efficiently managed and have strong prospects , there is more to it . If it so that the whole market is already aware of a good firm or a good investment , then such discovery is not apt to bring any gain for a particular investor or analyst . The reason for this is that publicly available knowledge about a good firm boosts the price of the investment in that firm and hence yields a less than superior return

Good fundamental analysts do not aim to find firms or companies that are good investments but they actually tend to identify such firms or companies that superior than what everyone else has estimated to be Such efforts make it difficult to run fundamental analysis . Making a good analysis does not suffice a good fundamental analyst has to outsmart his competitors for the reason… [banner_entry_footer]


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