Forecasting Methods And Stock Market Analysis Page 3
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8Forecasting methods and stock market analysis
105
Technical analy-
Fundamental
Efficient market the-
sis
Analysis
ory
1.
Objec-
The short-term pre-
The determination
The explanation of the
tives
diction of the share
of
the
“intrin-
formation of the share
price, based on their
sic value” of the
price, based on a general
historical evolution.
shares,
based on
behavior model, named
economical
and
the “efficient market”.
non-economical
factors.
2. Supposi-
The prices’ series
The market value of
The markets do not have
tions
and the transaction
a share has to os-
memory; any informa-
volume
describe
cillate around its in-
tion regarding the share
some
trajectories
trinsic value. Oth-
is instantly adjusted in
and
trends
that
erwise the share is
price; that is why the
will
repeat
in
over or under esti-
past is of no help in pre-
the
future,
and
mated.
dicting the future.
the
shares’
price
is
determined by
demand and supply.
3.
What
Tells
the
users
Tells
them
what
The weak hypothesis tells
it
recom-
which
and
how
they have to buy
them that the historical
mends
to
many shares they
in order to obtain
prices of shares are ran-
the users?
have to buy or sell
benefits.
dom and do not contain
in order to gain
useful information that
profits.
should lead to over-the-
average earnings.
The intermediate hypoth-
esis indicates the time
delay of the price ad-
justment to new infor-
mation.
The
strong
hypothesis
shows that nobody will
earn more, regardless of
the strategy that is used,
because all the informa-
tion is inside the price.
4.
Which
Mainly speculators
Mainly people who
Both
speculators
and
are the tar-
and short-term in-
want to save and
long-term investors.
get users?
vestors.
long-term investors,
not interested in the
short-term fluctua-
tions.
5.
Meth-
Study
of
graphs,
Economical-
Statistical methods (re-
ods that are
time series and a
financial
studies,
gression and correlation
used
certain dose of com-
macro-economical
analysis), the test of the
mon sense.
analysis,
multi-
signs, the rule of the fil-
variate
statistical
ters, econometric analy-
analysis,
behavior
sis.
theory (psychology,
sociology, politics).
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