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| Jun 1, 2019 | » | 05. Technical and Fundamental Analysis
5 min; updated Nov 23, 2024
Technical Analysis Study past price movements and trading volume of trading to to predict when to buy/sell a stock. Based on the castle-in-the-air view of stock pricing. Trying to be smarter than the crowd. Is this only sustainable in an environment that has a sizable number of unsophisticated investors? Seems like it’d be a tax on new entrants to a stock market, e.g., making stock-picking a mainstream occurrence, and having the incumbents exploit the novices.... |
| Jun 1, 2019 | » | 06. Technical Analysis and the Random Walk Theory
3 min; updated Mar 12, 2022
Is There Momentum in the Stock Market? Past stock prices cannot be used reliably to foretell future movements. Furthermore, transactions costs and taxes make it hard to exploit any short-term momentum. Flip a fair coin many times. Sequences of heads (or tails) and jumbled up sequences occur with equal probability. Just What Exactly is a Random Walk? In a random walk, knowing all prior moves is no help in predicting the next move.... |
| Jun 1, 2019 | » | 07. How Good is Fundamental Analysis? The Efficient Market Hypothesis
2 min; updated Mar 12, 2022
Fundamentalists tout past earnings growth as a most reliable indicator of future growth. But academics have shown that past earnings growth are no help in predicting future growth. Why is the Crystal Ball So Clouded? Many of the influential changes that affect earnings prospects are unpredictable. Creative accounting procedures produce dubious reported earnings, e.g. pro forma earnings, pushing due payments to future years, etc. Analysts may make errors, e.g. over-estimating the market size.... |