Talk:Fundamental analysis

Rewrite

I agree with most previously written here. I have redirected here the pages "stock valuation" and "financial statement analysis" and "financail analysis". I think most of the issues below are now "moot". So I will delete them all in about a week unless I hear from you.......Retail Investor 19:29, 3 October 2006 (UTC)[reply]

confused

this entry defines Fundamental analysis as one type of stock valuation, in particular one that uses financial analysis. In the entry on financial analysis, both discounted cash-flow methods and market-based valuation methods such as p/e ratio's etc are mentioned. On the other hand, the stock valuation entry, mentions exactly the same points. Stock valuation is seen as valuing stocks using financial analysis - i.e. equal to fundamental analysis. In my opinion, this is correct. Technical analysis is a method of forecasting based on earlier movements in price, it is not putting a value to something, i.e. it is not a method of stock valuation. Therefore, there are two distinct methods of trying to determine whether to buy, sell, or hold - technical analysis and fundamental analysis, and the latter is the same as stock valuation (so should be merged). - DocendoDiscimus 08:23, 7 October 2005 (UTC)[reply]

It appears the the authors wanted stock valuation to be the more general article and fundamental and technical analysis to be sub-articles. I agree with your assessment of technical analysis as being essentially predictive of a future value rather than a current valuation. And I agree that fundamental analysis is most suited to determining a current value. But I think the central question is: "Do we want the valuation article to be limited to only dealing with current valuations?". Is there not room in the article for a section on predicting future values? Yes, the techniques are very different, and (in my opinion) the reliability of the results is very different, but I'm not sure that that is a good enough reason to merge. If we merged, we would have either a stock val article and a tech analysis article, or a fun analysis and a tech analysis article. Would this really be an improvement? mydogategodshat 04:47, 9 October 2005 (UTC)[reply]

The statement "There is very little evidence that fundamental analysis is useful to investors in developed financial markets and some experts suggest that a monkey throwing darts at the financial pages of a newspaper may do just as well in the long run (see Efficient market hypothesis)" is highly controversial, especially after the stockmarket runup in the late 1990s. There is a significant amount of research that shows not only that markets vary in their efficiency, and that this depends on market structure and organization. Grossman and Stiglitz in their landmark academic paper "The Impossibility of Informationally Efficient Capital Markets" show that liquidity would be zero in efficient markets (Stiglitz is a Nobel prize winner, so is not easily discounted). Successful investors like Warren Buffet catagorically reject technical analysis in favor of fundamental analysis. Though there may still be supporters of the efficient market hypothesis, I would suggest that this hypothesis can no longer be considered mainstream. (Chris Westland)

Not only is the problem that "There is very little evidence that fundamental analysis is useful to investors in developed financial markets and some experts suggest that a monkey throwing darts at the financial pages of a newspaper may do just as well in the long run (see Efficient market hypothesis)" is a highly controversial statement, ask one professor and he will call it laughable to assert anything else while another will call emh "quite a heroic assumption". The other problem is that EMH in no way asserts that "a monkey throwing darts" will be as successfull, for elaboration on this point see any article on portfolio theory. Even though you may have an efficient market, you still have to consider diversification.

Just quickly- the current value of a stock is dependent on its future earning potential and hence its future value, so fundamental and technical analysis aim to achieve the same thing- determine the current value of a stock. The EMH requires that investors, by and large, intelligently respond to market conditions. How do we know what the 'market conditions' are? - Fundamental analysis! I think the 'monkey throwing darts' analogy is more often a criticism of technical analysis (e.g. see the random walk hypothesis). Fundamental anaysis is far more theoretically sound than technical analysis. The advantage of technical analysis is that historical share price information is much more readily available and can be quantitatively analysed using mathematical techniques. It is significantly harder and more time consuming to gather the information required for good fundamental analysis - indeed, you can never have enough! Furthermore, fundamental analysis is a more subjective, qualitative analysis technique. As it stands I think this article gives a very poor account of fundamental analysis, especially given the authoritative article on technical analysis.

Stock Valuation should not be merged with Fundamental Analysis. Fundamental Analysis is just one form of Stock Valuation of many.

Merge tag

"fundamental analysis" has more hits than "stock valuation". If the two were equivalent and a merge is to be done, it would seem stock valuation should be merged here. However, as per Wikipedia:No original research, a citation is needed that defines the terms as equivalent. Shawnc 14:54, 1 January 2006 (UTC)[reply]

You are right. Another thing is that fundamental analysis can be used for other purposes than stock valuation (or, more broadly, business valuation), for credit rating for example. I'm against a merger. --Pgreenfinch 16:35, 21 January 2006 (UTC)[reply]

The current tag does not refer to stock valuation, rather it aims to merge "Fundamental analysis" with "FundamentalS analysis". I think the other article just misspelled it, and will merge the 2 tomorrow, if nobody objects. Smallbones 09:53, 24 March 2006 (UTC)[reply]

merge

Let's just merge everything into one article and call it "the Universe." That'd make everything much easier.