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Questions and Answers
What analysis method focuses on the value of a company based on financial statements and economic indicators?
What analysis method focuses on the value of a company based on financial statements and economic indicators?
What type of industries typically exhibit stable earnings and lower risk during economic downturns?
What type of industries typically exhibit stable earnings and lower risk during economic downturns?
Which pattern indicates a potential price reversal after a price increase?
Which pattern indicates a potential price reversal after a price increase?
Which of the following is a hypothesis that suggests markets efficiently reflect all available information?
Which of the following is a hypothesis that suggests markets efficiently reflect all available information?
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In technical analysis, which term refers to the price level where selling is strong enough to overcome buying pressure?
In technical analysis, which term refers to the price level where selling is strong enough to overcome buying pressure?
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What is the key conclusion of the efficient market hypothesis?
What is the key conclusion of the efficient market hypothesis?
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Which of the following statements is TRUE about random walk theory?
Which of the following statements is TRUE about random walk theory?
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How does the semi-strong form of the efficient market hypothesis differ from the weak form?
How does the semi-strong form of the efficient market hypothesis differ from the weak form?
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According to rational expectations hypothesis, which statement is TRUE?
According to rational expectations hypothesis, which statement is TRUE?
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What would be the implication if investors reacted to new information simultaneously and identically?
What would be the implication if investors reacted to new information simultaneously and identically?
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What primarily drives the predictions made by technical analysts?
What primarily drives the predictions made by technical analysts?
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Which of the following assumptions is NOT a part of technical analysis?
Which of the following assumptions is NOT a part of technical analysis?
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What is the main focus of technical analysts in their analysis?
What is the main focus of technical analysts in their analysis?
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Which component is NOT considered a primary source of information in technical analysis?
Which component is NOT considered a primary source of information in technical analysis?
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In technical analysis, what do analysts believe regarding fundamental analysis?
In technical analysis, what do analysts believe regarding fundamental analysis?
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How do technical analysts measure market sentiment?
How do technical analysts measure market sentiment?
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What happens to stock prices if investors doubt growth expectations?
What happens to stock prices if investors doubt growth expectations?
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What do technical analysts track to predict future price moves?
What do technical analysts track to predict future price moves?
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Which statement about market action is accurate according to technical analysis?
Which statement about market action is accurate according to technical analysis?
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What is a key weakness of fundamental analysis as viewed by technical analysts?
What is a key weakness of fundamental analysis as viewed by technical analysts?
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Study Notes
Fundamental and Technical Analysis
- Fundamental and technical analysis are widely discussed in financial press
- These are tools for investors to use to interpret information, understand trends and make decisions
- Some key stock market theories are efficient market hypothesis, random walk theory, and rational expectations hypothesis
Efficient Market Hypothesis
- The efficient market hypothesis assumes that profit-seeking investors react quickly to the release of information.
Random Walk Theory
- The random walk theory assumes new information concerning a stock is disseminated randomly over time.
Rational Expectations Hypothesis
- The rational expectations hypothesis assumes that people are rational and have access to all necessary information.
Fundamental Industry Analysis
- Used to determine the value of a stock
- Complete online learning activity to assess knowledge
Technical Analysis
- The process of analyzing historical market action in an effort to determine probable future price trends
- Technical analysts believe that all known market influences are fully reflected in market prices
- Technical analysts believe that there is little advantage to be gained through fundamental analysis
- The market itself indicates the direction and the extent of its next price move
- Chart formations reflect market participant behavioural patterns that tend to repeat themselves
Reversal Patterns
- Indicators of a trend reversal.
- Head-and-shoulders formation is a common reversal pattern
- The head-and-shoulders formation can occur at either a market top or a market bottom
Continuation Patterns
- A pause in an existing trend
- Symmetrical triangle is a common continuation pattern
Quantitative Analysis
- A form of technical analysis that relies on statistics
- Moving average is a common quantitative tool for smoothing out fluctuating values
- Used to identify long-term trends
- Moving average can show whether a change is signaled by comparing current prices with the moving average line
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Description
Test your understanding of fundamental and technical analysis in finance. This quiz covers major stock market theories including the efficient market hypothesis, random walk theory, and rational expectations hypothesis. Assess your knowledge and decision-making skills based on these key concepts.
