FINS1612 Lecture Notes - Lecture 5: Fundamental Analysis, Technical Analysis, Program Trading
Document Summary
What causes the shifts i(cid:374) de(cid:373)a(cid:374)d a(cid:374)d supply of a co(cid:373)pa(cid:374)y"s securities o(cid:374) th seco(cid:374)dary market: three approaches to answering this question, fundamental analysis: top-down, fundamental analysis: bottom-up, technical analysis. Consider macro factors: economic growth of international economies, exchange rates, domestic economy. Government responses to changes in the above factors. Technical analysis: explains and forecasts share price movements base on past price behaviour, assumes markets are dominated at certain times by mass psychology, from which regular patterns emerge, two main forecasting models. Moving averages: smooth out a series facilitating the identification of trends in the series, calculation of ma. Assuming a five-day moving average, the ma is calculated by taking the average of the price series for the preceding five days: trading rules. Buy when the price series cuts the ma from below. Buy when the ma flattens or declines and the price series cuts the ma from above.
