Stocks Investment Strategy

Stock Theories

1. Efficient Market Theory (EMT)


2. Random Walk Theory - Burton Malkiel: A Random Walk Down Wall Street
No market strategy can consistently outperform a buy-and-hold index approach.

3. Modern Portfolio Theory - Harry Markowitz: Portfolio Selection: Efficient Diversification of Investment
The investor's objective is to maximize the portfolio's expected return, subject to an acceptable level of risk; the investor's objective is to minimize the level of risk, subject to an acceptable expected rate of return.
Efficient Frontier
Capital Asset Pricing Model (CAPM)
Arbitrage Pricing Theory (APT)

Investor's Due Diligence (DD) List:



Stock Analysis Methods

Fundamental Analysis
Security analysis based on fundamental facts about a company as revealed through its financial statements and an analysis of economic conditions that affect the company’s business.
It involves assessing the short-tem, medium-term, and long-term prospects of different industries and companies, as well as interest levels, capital market conditions, and economics
Pay special attention to company’s debt-equity ratio, profit margins, dividend payout, earnings per share, sales penetration market share, interest, asset, and dividend coverages, product or marketing innovation, and the quality of its management.

Technical Analysis
Analysis based on investor attitudes and psychology as revealed in charts of stock price movements and trading volumes to predict future price action.
Is the study of historical stock prices and stock market behaviour to identify recurring patterns in the data.

Quantitative Analysis
The study of economic and stock valuation patterns in order to identify and profit from any anomalies.
Involves studying interest rates, economic variables, and industry or stock valuation using computers, databases, statistics and an objective, mathematical approach to valuation.

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