Does Fundamental and Technical Analysis Reduce Investment Risk for Growth Stock? An Analysis of Taiwan Stock Market

Abstract

In this paper, we implement methodology to empirically identify how individual trader can make profits by applying combined strategies of identifying fundamental and technical risk management. Our data is from Taiwan Economic Journal Database (TEJ), and covering information from 1991 to 2009. Proper risk management skills employed increase the momentum portfolio returns. We explore investment opportunity by examining firm level of financial factors, including profitability, operating efficiency, accounting conservatism and solvency. When investors obtain quotations and identify potential stocks, volume data of the key attributes of stocks usually goes overlooked as price-to-earnings ratio, market size, or even ex-dividend date even comes in priority. In order to justify the optimal timing of investment, we use the covariance between price and volume as a buying signal to filter portfolios for technical analysis. Result confirms selected portfolios earn significant excess returns which beat the market with long term holding period.

The Dynamics of Individual Investment Decisions: Evidence From The Dhaka and Chittagong Stock Exchange, Bangladesh

“…In this case, investors assess economic aspects, industry patterns, firm-level indicators and macro-level market trends as part of the fundamental analysis (Nagendra, Kumar & Jayashree, 2018;Rubio, 2013). For example, Sumaji and Salim (2017) indicate that technical analysis is effective for forex investment, but Wang, Yu and Wen (2014) focus on GDP growth, inflation rate, interest rate, national savings, exchange rate, and foreign investment as part of the fundamental analysis.…”

“…Bonga (2015) emphasises industry analysis and its movement considering industry growth, maturity, competition, and substitution (Drakopoulou, 2016), but the determinants are subject to company analysis (Agustin, 2019;Nagendra, Kumar & Jayashree, 2018). According to Wang, Yu and Wen (2014), technical analysis is related to price volatility and historical data of a stock or financial instrument. The key components of the technical analysis are price trends, chart patterns, moving averages, volume and momentum indicators, support and resistance levels, etc.…”

Effectiveness of the Relative Strength Index Signals in Timing the Cryptocurrency Market

“…A large proportion of investors use TA to support FA. However, many studies show that treating them as equal but different market elements allows for the building of a compelling investment system [ 13 , 14 ].…”