Investment Analysis Quiz
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Questions and Answers

What type of analysis involves understanding market trends and price patterns to inform investment decisions?

  • Technical analysis (correct)
  • Quantitative analysis
  • Cycle analysis
  • Fundamental analysis

Which option describes a market situation where an economic slowdown could impact cyclical industries negatively?

  • Emerging growth industries thriving
  • Blue-chip stocks gaining value
  • Cyclical industries facing potential decline (correct)
  • Defensive industries remaining stable

What is the term used to describe a pattern in stock price movement that suggests a potential reversal in trend?

  • Head-and-shoulders formation (correct)
  • Resistance levels
  • Support levels
  • Continuation pattern

Which analysis strategy utilizes historical price data and statistical measures to predict future stock performance?

<p>Quantitative analysis (A)</p> Signup and view all the answers

What concept suggests that the market reflects all available information in the price of securities?

<p>Efficient market hypothesis (C)</p> Signup and view all the answers

What is the primary difference between fundamental analysis and technical analysis?

<p>Fundamental analysis evaluates securities based on intrinsic value, while technical analysis relies on past price movements. (D)</p> Signup and view all the answers

Which of the following macroeconomic factors can influence investor expectations according to fundamental analysis?

<p>Interest rate changes (D)</p> Signup and view all the answers

How does industry classification impact a company’s stock valuation in fundamental analysis?

<p>It shapes the market dynamics and competitive landscape in which the company operates. (C)</p> Signup and view all the answers

What effect does an increase in taxation generally have on corporate dividend payouts?

<p>Reduces dividend payouts as funds are redirected to taxes. (D)</p> Signup and view all the answers

What tools are typically employed in technical analysis?

<p>Price charts and patterns (B)</p> Signup and view all the answers

Which of the following statements about the relationship between fundamental and technical analysis is correct?

<p>Technical analysis primarily relies on short-term market movements, while fundamental analysis looks at long-term value. (D)</p> Signup and view all the answers

What limitation affects the implementation of fiscal policy according to the content?

<p>The effects of fiscal actions take time to manifest in the economy. (B)</p> Signup and view all the answers

What is a consequence of a government spending increase on the economy?

<p>It can potentially lead to short-term economic growth. (A)</p> Signup and view all the answers

Which fiscal policy measure is designed to boost share ownership of Canadian companies?

<p>Dividend tax credit. (D)</p> Signup and view all the answers

How can tax cuts influence the profitability and stock prices of businesses?

<p>They boost profits and help raise common share prices. (A)</p> Signup and view all the answers

What happens to corporate profits when buyers resist higher costs?

<p>Corporate profits may decrease, reflecting in lower share prices (D)</p> Signup and view all the answers

How does rising inflation affect an investor's price willingness for a company's earnings?

<p>Investors are more likely to pay a lower price for the earnings (B)</p> Signup and view all the answers

What classification system is used by S&P and MSCI for industry categorization?

<p>Global Industry Classification Standard (GICS) (A)</p> Signup and view all the answers

What factors primarily influence industry and company profitability?

<p>The structure of the industry and competitive strategy (C)</p> Signup and view all the answers

How many sub-industries does S&P and MSCI assign companies to within their classification system?

<p>163 sub-industries (B)</p> Signup and view all the answers

Flashcards

Fundamental analysis

Examines a company's financial statements, industry trends, and overall economic climate to predict the future value of a security.

Technical analysis

Uses past price and volume data to identify trends and patterns in a security's price, often relying on charts and graphs.

Macroeconomic Factors

Broad economic factors that affect the entire economy, including inflation, interest rates, and economic growth.

Industry classification

A system used to categorize companies based on their industry, such as technology, healthcare, or retail.

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Technical analysis tools

These are tools used in Technical analysis that help to identify patterns and trends in price action.

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Continuation pattern

A movement in a security's price that continues in the same direction as the previous trend. It suggests that the underlying trend is likely to continue.

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Reversal pattern

A movement in a security's price that suggests a reversal of the previous trend. It indicates a potential shift in market sentiment.

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Resistance levels

The price level at which a security is expected to encounter resistance to further price increases.

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Government spending and economy

Government spending, like on goods, services, and capital programs, has a direct impact on the overall economic activity. Increased spending stimulates the economy, while cuts have the opposite effect.

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Tax levels and spending

When governments increase tax levels, individuals and businesses have less money to spend, leading to a slowdown in economic activity.

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What is Fiscal Policy?

Fiscal policy refers to the use of government spending and taxation to influence the economy's performance.

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How do tax changes affect the economy?

Tax changes can affect individual spending and business profits. Higher taxes generally reduce spending and expansion, while tax cuts can stimulate economic growth.

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Targeted Fiscal Policies

Targeting specific sectors with fiscal policies, like offering tax incentives for certain industries, can stimulate economic growth in those targeted areas.

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Price Resistance

When a company's costs continue to rise, they cannot keep increasing prices indefinitely, as buyers will eventually resist.

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Inflation and P/E ratio

The relationship between inflation and a company's price-to-earnings ratio, where rising inflation leads to a lower price-to-earnings ratio.

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Industry Structure & Valuation

Analyzing a company's industry structure helps understand its potential for profitability and growth compared to its competitors.

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Classifying Industries

A classification system that categorizes companies based on the products or services they offer, with examples including the automobile industry or technology industry.

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GICS (Global Industry Classification Standard)

A comprehensive industry and sector classification system developed by Standard & Poor's (S&P) and Morgan Stanley Capital International (MSCI) that groups companies into 11 sectors, 25 industry groups, 74 industries, and 163 sub-industries.

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Study Notes

Fundamental and Technical Analysis

  • Analysts use statistical, market, and industry information to value securities and make recommendations
  • Two methods of analysis: fundamental and technical
  • Fundamental analysis assesses the short, medium, and long-range prospects of industries and companies to understand security prices
  • Technical analysis studies historical stock prices and market behavior to predict future prices and behavior

Learning Objectives

  • Compare and contrast fundamental and technical analysis
  • Describe how macroeconomic factors affect investor expectations and security prices
  • Explain how industries are classified and how this affects company stock valuation
  • Describe the tools used in technical analysis

Key Terms

  • Blue-chip
  • Chart analysis
  • Continuation pattern
  • Contrarian investors
  • Cycle analysis
  • Cyclical industry
  • Declining industries
  • Defensive industries
  • Economies of scale
  • Efficient market hypothesis
  • Emerging growth industries
  • Fundamental analysis
  • Growth industry
  • Head-and-shoulders formation
  • Mature industries
  • Moving average
  • Neckline
  • Quantitative analysis
  • Random walk theory
  • Rational expectations hypothesis
  • Resistance levels
  • Reversal pattern
  • Sentiment indicators
  • Speculative industry
  • Support levels
  • Technical analysis

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Related Documents

Fundamental and Technical Analysis PDF

Description

Test your knowledge on investment analysis concepts, including market trends, technical and fundamental analysis, and the effects of macroeconomic factors on stock valuation. This quiz covers key terms and strategies used by investors to make informed decisions.

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