Security Analysis Flashcards
Company analysis, factors affecting. Techniques used in Company analysis.
It s Careful examination of companies. Qualitative and Quantitative fundamental.
Factors:
Networth and book Value.
Sources and uses of fund.
Size and ranking of the company.
Growth records
financial analysis
Quality of mgmt.
regulations.
Techniques
correlation and regression analysis.
Trend analysis.
Decision trese analysis.
- Industry analysis factor of IA, and Technique used
When economy grows it is not necessary that all the industry in economy also grow in
Same rate.
necessary to examine Industry Specific factor
Factors
GDP Between Country
Govomment attitude.
Demand and Supply Gap
product life cycle.
Barries to Entry.
Technology and research.
Cost Condition and profitability.
Techniques wird in Industry Analysis
Regression Analysis:
determining the demand for the output of the industry through product demand analysis
Input output Analysis
floco of goods through economy,
From raw mal to final Consumpton,
Economic analysis..
Factors and techniques
Economic factors are the macro economic factors
factors
Growth Rate of National Income.
-Growth Rate of Industry
Inflation
Monsoon.
Techniques
Anticipatory Survery:
Opinion about the future state of the economy from experts and spending by the consumers.
2)Indicator Approach
Indicator used to find out how economy shall performed
a)leading Indicator:
B)lagging Indicator
3)Economic model Building Approach:
Determining the clear relationship between depindend and Independend Variable
The step used are
1)hyothesize the total Economic demand by meaning the GNP
2) forecast the GNP wing Various Component
3)Compansion is made of total GNP
Technical analysis
Method of share price movement based on the study of price chart and graph..
On the assumption share price are repetitive
Technical analysis assumption
marketValue of stock → depand on Supply and demand of stock.
Supply and demand is actually governed by Several factor.
stock price generally move in a trend.
which continue over a period.
Technical analysis depends upon
chart analysis.
Principles of technical analysis
Market discounts everything.
price moves in a trends
History tends to repeat itself
THE DOW THEORY
It is based upon movements of two indices, Dow Jones Industrial Average (DJIA) and Dow Jones Transportation Average (DJTA).
The movements of the market are divided into 3 classifications, the primary movement, the secondary movement, and the daily fluctuations.
Primary movement is the main trend which lasts from 1 year to 36 months.
Secondary movement is shorter than primary movement. It lasts from 2 weeks to a month.
Daily fluctuations are narrow movements from day-to-day.
. Purpose of dow theroy is to determine where the market is and where it is going
Elliot wave theroy
Elliot found that Market exhibits certain repeated patterns or wave
Waves are 2 types
1) impulsive Pattens
3 or 5 waves in given direction ( going upwards or downwards)
2) corrective pattern
Correcting the earlier rise in case of bull market and fall in case of bear market
Random walk theroy
It is based on following assumptions:
Prices of shares in stock market can never be predicted.
Reason is that the price trends represent only statistical expression of past data.
There may be periodical ups or downs in share prices, but no connection can be established between two successive peaks (high price) and troughs (low price).
Efficient Market Theory (Efficient Market Hypothesis)
It states that all available price sensitive information is fully reflected in securities’ prices.
It states that no none can “beat the market”. Hence it is impossible to outperform the market.
Misconception about Efficient Market Theory
Efficient Market Theory implies that market prices include all available information.
Although price tends to fluctuate, they cannot reflect fair value.
Inability of portfolio managers to achieve superior performance implies that they lack competence in efficient market.
Random movement of stock prices suggests that stock market is irrational.
Level of Market Efficiency
a. Weak form efficiency
b. Semi – Strong efficiency
c. Strong form efficiency
3 types of tests to verify weak form of Efficient Market Theory
a. Serial Correlation Test
b. Run Test
c. Filter Rules Test
Challenges to the Efficient Market Theory
Information inadequacy
b. Limited information processing capabilities
c. Irrational Behaviour
d. Monopolistic Influence
