Inclined Supports and Resistance- These are formed when supports or resistances at increasing or decreasing price levels are joined to create trend lines. Importance of Support and Resistance 1. It also gives signals to traders and investors when to enter or exit a stock. 2. Supports and Resistance helps traders and investors to identify trends in the stock prices.
For example, money supply and interest rate influenced stock price positively, while inflation influenced stock price negatively. Macroeconomic variables are considered good indicators for predicting and assuming the stock market direction and stock price other than financial variables. It is believed that macroeconomic factors which are publicly available can be used to make investment decisions and past information can be utilized to predict the stock market returns. Macroeconomic variables are important especially to fundamental investors to forecast future trends of stocks in order to make good investment. Macroeconomic variable such as inflation will affect the stock price due to the fact that inflation announcement often reduce the stock price and decrease the discount rate causing the value of the company to reduce, Monetary policy will also affects the stock market as it act as liquidity indicator and economic activity.
Market Risk Sometimes prices and yields of all securities rise and fall. Broad outside influences affecting the market lead to this. This is true, may it be big corporations or smaller mid-sized companies. This is known as Market Risk. A Systematic Investment Plan (SIP) that works on the concept of Rupee Cost Averaging (RCA) might help mitigate the risk.
Section I: Introduction The risk-return tradeoff is a concept fundamental to finance. The basic tenet is that rational investors expect higher rates of return for riskier investments; as such, stock returns should be a negative function of stock volatility. Two hypotheses: The “leverage effect” and volatility feedback, have been put forth in support of this view. The underlying notion behind the leverage effect is that a decrease in stock returns increases a firm’s leverage, resulting in higher equity volatility. Volatility feedback, on the other hand, reverses the causality and posits that a persistent increase in volatility causes investors to raise their expected returns.
Since diversification decreases firm risk, it can be expected that higher vega will result in increased focus of the firm and hence less diversification. This hypothesis is supported by the regression results which indicate positive correlation between vega and Herfindahl Index, and negative correlation between vega and number of segments. The hypothesis for the correlation between leverage and vega is that firm risk will increase if it has a high leverage. In observing the correlation between leverage and vega, the authors used book leverage as dependent variable because market leverage may fluctuate because of changes in stock performance rather than active managerial decision. The regression results are consistent with the hypothesis since leverage has positive relation with vega.
If he decides to decrease his ownership, there will be more shares actively traded and the liquidity of the market will go up. Wit... ... middle of paper ... ... And they investigate that the liquidity of financial markets affect the choice of capital production technology, per capita income and per capita capital stock, the level of financial market activity, the real return on saving, and welfare of steady state equilibrium. By pooling and diversifying risks, by increasing liquidity or by reducing monitoring costs, financial markets and institutions are believed to have a positive impact on growth because they divert investments towards more productive activities or increase the flow of savings (Blacburn and Hung, 1998). Levine (1997) illustrates the role of finance in the growth by comparing between German bank-based system and United States securities market-based system. Which is called the “Functional Approach “.
This is determination of market value by supply and demand while those are defined by numerous factors. The second concept is that stock prices tend to move in trends that persist for certain period. Thirdly, trends result of shifts in supply and demand and these shifts can be detected in analysis of market action. Also, trends of prices can be revealed on charts that are the core of technical analysis. Concepts of support and resistance are used in order to determine if the market is trading or trending.
Investors who have invested money into the stocks of the public listed company are now shareholders of that company, where investors now own a part of the company. The purpose of investors investing their money into the stock market is for the financial return, also known as profits. If the company or firm makes a profit, shareholders will be rewarded with dividends however, if the company is making losses, shareholders will also be making a loss in their investment. The stock market prices are volatile where prices rise and fall on a daily basis therefore, investors who invests in the stock market should be aware of the risks involved. The importance of stock market The primary importance of the stock market is to increase the country’s economy as well as the global economy.
Introduction Investor’s investment decisions are based on the valuation of stock which they conducted before making the decision. Generally investors prefer to invest in the undervalued stocks and sell their holding of stocks that they considered to be overvalued. There are many different methods of stock valuation. In addition, there are many factors which increases the risk related to the valuation of the stocks. This paper focuses on the fundamental analysis used for the valuation of the stocks.
Some factors both directly and indirectly influence the performance of a stock exchange and need to be understood by the investors for making a better decision regarding their investments. This study covers the macroeconomic factors and volatility (uncertainty) influencing the stock market returns. Macroeconomics deals with the broader picture of the economy and examines the recurring activities and developments in economy-wide occurrences, such as unemployment, inflation, economic growth, money supply and exchange rates etc. Various empirical studies have tested the macroeconomic variables with the stock returns. For example Inflation has an effect on stock returns (Attari and Safdar 2013), Inflation