tailieunhanh - Charles J. Corrado_Fundamentals of Investments - Chapter 8

CHAPTER 8 Stock Price Behavior and Market Efficiency “One of the funny things about the stock market is that every time one man buys, another sells, and both think they are astute.” William Feather “There are two times in a man’s life when he shouldn’t speculate: When he can’t afford it | CHAPTER 8 Stock Price Behavior and Market Efficiency One of the funny things about the stock market is that every time one man buys another sells and both think they are astute. William Feather There are two times in a man s life when he shouldn t speculate When he can t afford it and when he can. Mark Twain Our discussion of investments in this chapter ranges from the most controversial issues to the most intriguing to the most baffling. We begin with bull markets bear markets and market psychology. We then move into the question of whether you or indeed anyone can consistently beat the market. Finally we close the chapter by describing market phenomena that sound more like carnival side shows such as the amazing January effect. marg. def. technical analysis Techniques for predicting market direction based on 1 historical price and volume behavior and 2 investor sentiment. Technical Analysis In our previous two chapters we discussed fundamental analysis. We saw that fundamental analysis focuses mostly on company financial information. There is a completely different and controversial approach to stock market analysis called technical analysis. Technical analysis boils down to an attempt to predict the direction of future stock price movements based on two major types of information 1 historical price and volume behavior and 2 investor sentiment. 2 Chapter 8 Technical analysis techniques are centuries old and their number is enormous. Many many books on the subject have been written. For this reason we will only touch on the subject and introduce some of its key ideas in the next few sections. Although we focus on the use of technical analysis in the stock market you should be aware that it is very widely used in the commodity markets and most comments or discussion here apply to those markets as well. As you probably know investors with a positive outlook on the market are often called bulls and a rising market is called a bull market. Pessimistic investors .

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