This document discusses fundamental analysis for investment purposes. It defines fundamental analysis as evaluating a security's intrinsic value based on external factors that could influence future price. The document outlines factors to consider in fundamental analysis including quantitative company financials, qualitative company/industry attributes, and macroeconomic, industry, and company specifics. It also describes different types of fundamental analysis and tools used for economic analysis in fundamental evaluation.

1. SRI KRISHNA COLLEGE OF TECHNOLOGY
SCHOOL OF MANAGEMENT
21PNE001 – INVESTMENT ANALYSIS
AND PORTFOLIO MANAGEMENT
Mr. SARAVANAN
ASSISTANT PROFESSOR

2. MODULE 2 – FUNDAMENTAL AND
TECHNICAL ANALYSIS
2.1: Fundamental analysis
Economic analysis
Industry Analysis
Company Analysis
2.2: Technical Analysis

3. Fundamental Analysis
• Detailed analysis for the fundamental factors affecting the
performance of the company.
• Systematic approach to estimating the future dividends and share
prices.
• Economy fundamentals, industry fundamentals and company
fundamentals have to be considered while analysing a security for
investment purpose.
• Fundamental analysis is a method of evaluating the intrinsic value
of an asset and analysing the factors that could influence its price
in the future. This form of analysis is based on external events and
influences, as well as financial statements and industry trends.

4. Factors of fundamental analysis
• Quantitative factors
Balance sheet (Analyse assets, liabilities and equity)
Income statement (revenues, expenses and profit)
Statement of cash flows (Cash inflows and outflows Cash from
investing(CFI), Cash from financing (CFF) and Operating cash
flow(OCF)
• Qualitative factors
Business model (What company exactly do?)
Competitive advantage
Management
Corporate governance

5. Types of fundamental analysis
• Macro fundamental analysis
Top down approach
Focuses on broad economic factors that affect the stock market as
a whole
It starts with overall performance of the economy, its impact on
industry groups and finally to companies.
• Micro fundamental analysis
Bottom up approach
Starts by considering current price of the stock
Compared with dividend yield, price to earnings ratio and price to
asset ratio.
Evaluation of company is compared with industry

6. Market sizing approach
• Market growth for the past 5 years
• Future market growth for the next 5 years
• Market segmentation and identifying the segment which is more
profitable
• Players and their market shares
• This approach can be applied when we are having high
completion.

7. EIC Framework
• Fundamental analysis insist that no one should purchase or sell a
share on the basis of tips and rumours.
• Investor should make decision to buy and sell the shares based on
detail analysis about company, industry and economy.
• This results in informed investing.

8. Economy related factors
• Growth rate of GDP
• Industrial growth rate
• Inflation
• Interest rate
• Government budget and deficit rate

9. Industry related factors
• Demand and supply conditions in the industry
• Existence of substitutes
• Competition
• Changes in trend
• Labor
• Technological innovation
• Government policy

10. Company related factors
• Financial performance
• Operating efficiency
• Capital structure
• Competitive edge of the company
• Product and services offered
• Business model
• Management, corporate governance
• Marketing strategies
• Product launch

11. ECONOMIC ANALYSIS
• Economic Analysis relates to the analysis of the economy.
• This related to study about the economy in detail and
analyse whether economic conditions are favourable for the
companies to prosper or not.
• Analysts always try to find out whether the economic
development is conducive for the growth of the company.
• An investor in a security market can give prediction about the
future of share price of a company on the basis of the study
of forces affecting economic environment of the country.

12. FACTORS OF ECONOMIC ANALYSIS
The economy is studied to determine if overall conditions are
good for the stock market.
For the Economic Analysis, the Macro Economic Factors are studied to know
about the condition of an economy or performance of the security market of any
country.
Some points to be considered
GDP of the country Interest rates
Performance of security market Supply and demand of money
Inflation rate Government borrowings and loans
Taxation policy and rates Consumer and goods market
Foreign Direct Investment Balance of payments etc.

13. MAJOR TOOLS OF ECONOMIC
ANALYSIS
• Gross Domestic Product
• Fiscal Policy
• Monetary Policy
• Saving Rate
• Trade Deficit
• Exchange Rate
Trade Deficit

14. • GDP is the measure of the value of goods and services produced
within the domestic boundary of a country.
• It is calculated by adding the market prices of all the final goods
and services produces in the domestic territory in a year.
• The GDP is one the most important indicator used for the
measurement of the strength of a country's economy.
• In this value added by each firm is measured to determine the
health of the economy.
• We can understand it in this way also that increase in GDP means
increase in the production of goods and services which in turn will
result increase in sales of a company and thus increase in profits
of the company. This increase in profit will lead to more returns to
equity share holders and thus it affects share prices.
Gross Domestic product

15. • Fiscal policy is the policy through which government adjusts
its spending and tax rates to stabilize the economy.
• Fiscal policy is in principles based on the thoughts of John
Maynard Keynes, where governments could transform
economic performance by adjusting tax rates and
government spending.
• Commonly it has been stated that government spending in
the form of subsidies usually reduces the cost of product and
thus leaving scope for larger profit of the firm .
• The larger profit in turn leads to larger earning per share. This
increase in earnings per share will lead to increase in value of
share prices.
• On the other hand increase in taxes for the company reduces
the amount of profit available for share holders. Thus
increase in taxes has the effect of reducing the amount of
Earning per share and thus leads to fall in share prices of the
company.
Whether fiscal policy directly affect stock price or not?
Fiscal Policy

16. Monetary policy is deciding about interest rates at which money can be
borrowed.
In view of an investor, monetary policy affects share prices if there is variance
between the investors’ expectation about the movement of interest rate and
actual movement in interest rates.
If RBI raises the interest rate then it will impact the interest rate on
debentures and bonds. With increase in interest rates on debentures and
bonds there will be change in risk perception of investors and thus they will
want higher return on their equity investment.
Thus an increase in interest rate if not accompanied by increase in returned
of equity then investors will get inclines towards debentures and bonds
rather than equity.
This will affect the demand for equity and thus will lower its prices. Similarly
if change in interest rate is as per the expectation of investors then it will not
affect equity prices to a larger extent.
Monetary Policy is the instrument which it controls the supply of money.
Monetary Policy

17. Increase in interest rate Decrease in interest rate
This will result in an increase in demand for
equity shares.
A lower saving rate means lesser disposal of
funds by household into equity market which
will reduce the demand for equity.
Thus, share market will be bullish as it has an
impact of increase in share prices.
Thus, there will be reduction in share prices
and market will be bearish.
Changes in individual saving rate effect the flow of funds into investments.
Saving Rate

18. Highlights
Trade deficit occurs when countries imports are
more than its export.
In other words we can see it that a country is
buying more of foreign goods than it is selling to
them.
Thus this will impact domestic producers. More
imports mean more purchase of foreign goods
and less purchase of domestic goods.
This will result in more profitability to foreign
companies than domestic producers.
The lesser the profit lesser will the amount of
profits available to equity shareholders. Thus it
will result in decline in the prices of shares of the
domestic company.
On the other hand there will be an increase in
the prices of foreign company’s shares
Trade deficit also impact on share prices.
There are different views regarding trade deficit. Some believe that it is favourable in case of
strong expansion. Some says that it is to good in times of recession.
Trade Deficit

19. Exchange Rate
• Exchange rate at which one country’s currency can be traded for
another country’s currency.
• This in turn will also affect the trade and business of the
companies that is related to any foreign market whether for buying
raw material, selling goods or in any other way.
• The effect on such companies activities or business will affect that
companies profitability and enhance the prices of shares. Thus
exchange rate affects share prices.

20. Economic Forecasting Techniques
a. Economic indicators
b. Diffusion index
c. Surveys
d. Econometric model building
The above techniques helps to decide the right investment time,
type of security has to purchase i.e. stocks or bonds or combination
of stocks and bonds.

21. Economic indicators
The economic indicators are statistics about the economy that indicate the
present status, progress or slow down of the economy. They are capital
investment, business profits, money supply, GNP, interest rate,
unemployment rate, etc.
a. Leading indicators - The leading indicators indicate what is going to
happen in the economy. It helps the investor to predict the path of the
economy. The popular leading indicators are the fiscal policy, monetary
policy, productivity, rainfall, capital investment and the stock indices. The
fiscal policy shows what the government aims at and the fiscal deficit or
surplus has an effect on the economy.

22. b. Coincidental indicators - The coincidental indicators indicate
what the economy is. The coincidental indicators are gross
national product, industrial production, interest rates and reserve
funds. GDP is the aggregate amount of goods and services
produced in the national economy. The gap between the budgeted
GDP and the actual GDP attained indicates the present situation. If
there is a large gap between the actual growth and potential growth,
the economy is slowing down.
c. Lagging indicators - The changes that are occurring in the
leading and coincidental indicators are reflected in the lagging
indicators. Lagging indicators are identified as unemployment rate,
consumer price index and flow of foreign funds. These leading,
coincidental and lagging indicators provide an insight into the
economy’s current and future position.

23. Diffusion Index
• Diffusion index measures the number of stocks that have
advanced in price or are showing positive momentum.
• It is useful for determining the underlying the strength of the stock
market overall.
• Diffusion index= (Advances – Declines) +PDIV
• Advances =Number of stocks moving higher
• Declines=Number of stocks Moving lower
• PDIV=Previous Diffusion index value
• Indicate bullish or bearish position of stock market

24. Econometric Model Building
• For model building several economic variables are taken into
consideration. The assumptions underlying the analysis are specified. The
relationship between the independent and dependent variables is given
mathematically. While using the model, the analyst has to think clearly all
the inter-relationship between the variables. When these inter-
relationships are specified, he can forecast not only the direction but also
the magnitude.
Factors affecting economic forecasting:
GDP, Inflation, Interest rates, Government revenues, expenditure and
deficits, exchange rates, infrastructure, economic and political stability.
Y=a+bX (regression analysis)
Y=dependent variable X=independent variable
Mobile phone (DV) Price and Income are (IV)

25. Ho- there is relationship between mobile phone sales and price &
income
Ha – There is no relationship between mobile phone sales and
price& income

26. Stock investment decision
• Stable company – financially strong
• Company that grow and prosper – Profit and success
• Good management and corporate structure – right people in right
direction

27. Industry Analysis
• Industry analysis is a type of investment research that begins by
focusing on the status of an industry or an industrial sector. A form
of fundamental analysis involving the process of making
investment decisions based on the different stages an industry is
at during a given point in time. The type of position taken will
depend on firm specific characteristics, as well as where the
industry is at in its life cycle.

28. Industry life cycle
a. Pioneering stage
b. Rapid growth stage
c. Maturity and stabilization stage
d. Decline stage

29. Classification industries
a. Growth industries
b. Cyclical industries
c. Defensive industries
d. Cyclical-growth industries

30. Characteristics of an industry
analysis
1. Past sales and earning performance
2. Nature of competition
3. Raw materials and inputs
4. Attitude of government towards industry
5. Management
6. Labour conditions
7. Nature of product line
8. Capacity installed and utilized
9. Research and development

31. Fundamental Vs. Technical Analysis
Investors use techniques of fundamental
analysis or technical analysis (or often both) to
make stock trading decisions.
Fundamental analysis attempts to calculate the
intrinsic value of a stock using data such as
revenue, expenses, growth prospects and the
competitive landscape.
Technical analysis uses past market activity and
stock price trends to predict activity in the future.

32. Fundamental Analysis
Definition Calculates stock value using economic factors,
known as fundamentals.
Data gathered
from
Financial statements
Stock bought When price falls below intrinsic value
Time horizon Long-term approach
Function Investing
Concepts used Return on Equity (ROE) and Return on Assets
(ROA)
Vision looks backward as well as forward

33. Technical Analysis
Definition Uses price movement of security to predict future
price movements
Data gathered from Charts
Stock bought When trader believes they can sell it on for a higher
price
Time horizon Short-term approach
Function Trade
Concepts used Dow Theory, Price Data
Vision looks backward

34. Charting
Chart is the graphical representation of share prices of particular
company.
Charting represents a key activity in technical analysis. Security
prices are charted. A share may be traded in the market at different
prices on the same day. For that share prices charts are created.

35. Price Charts
Price charts represents the price movements of particular company
for the single time period or ‘n’ number of days. Four prices are
important, they are high price, low price, open price and close price.
Among these four prices close price is used in most of the analysis.
Price chart is the basic tool used by the technical analyst to study
the share price movement. The prices are plotted on y axis and x
axis represent trading days.

36. Types of price chart
a. Line chart – considered closing prices alone.
All the price movements are connected by a
straight line which would indicate the trend of
the market.
b. Bar chart –Considered high, low and close
price of each day are plotted on a day-to-day
basis. A bar is formed by joining the highest
price and the lowest price of the day. A small
horizontal hash on the right of the bar is used
to represent the closing price of the day

37. 10600
10650
10700
10750
10800
10850
10900
10950
11000
Close
Close
Line chart of NSE index

38. Bar Chart
10300
10400
10500
10600
10700
10800
10900
11000
11100
11200
High
Low
Close

39. c. Japanese candle stick chart
The Japanese candlestick chart shows the
highest price, the lowest price, the opening price
and the closing price of shares on a day-to-day
basis.
The highest and lowest price of the day joined
by vertical bar. The opening and closing price of
the day would fall between high and low prices
would be represented by a rectangle, so that it
looks like candlestick. Each day price
movements represented by candlestick.

40. Japanese Candle stick chart
10300
10400
10500
10600
10700
10800
10900
11000
11100
11200
Open
High
Low
Close

41. Types of candlesticks
a. White candlestick – Closing price of the day is higher
than the opening price of the day (Bullish trend)
b. Black candlestick – Opening price of the day is higher
than the closing price of the day (Bearish trend)
c. Doji – No difference between opening and closing price
of the day

42. Market Indicators
Indicators used by the technical analyst to study
the trend of the market as a whole are known as
market indicators. Market indicators are ratios
and formulas that explain current gains and
losses in stocks and indexes.
a. Breadth of the market
b. Short interest
c. Odd-lot index
d. Mutual fund cash ratio

43. Market Breadth Index
The difference between the advances and declines is
called the breadth of the market.
• Market breadth index measures the number of rising
stocks Vs. the number of declining stocks.
• An index greater than 1.0 suggests a future rise in the
market indices.
• An index less than 1.0 indicates fall in index values
Advance-decline line=Advancing stocks-Declining stocks+
previous net advances

44. Format
Day Advances Declines Total no. of
stocks
in the index
ADL
Mon 75 25 100 =75-25+0=50
Tue 40 60 100 =40-60+50=30
Wed 56 44 100 =56-44+30=42
Thurs 45 55 100 =45-55+42=32
Frid 65 35 100 =65-35+32=62

45. Short Interest
Short interest or short selling means selling a share that is
not owned by the person.
The speculator feels that the price of the stock will fall in
future.
The speculator plans to purchase the share (Cover his
short position) below the selling price and reap a profit.
The volume of short sales in the market is treated as
market indicator.

46. The buying activity increases the demand for the stocks. It has
significance for the market as a whole.
Short Interest ratio
= Short interest
Average daily volume
It indicates how many days of trading will take to cover up the total
short sales.

47. Problem for discussion
• A stock with 1.5 million shares sold short and 10 million shares
outstanding, find out short interest.
• Short interest =No. of shares sold short/No. of outstanding shares
• =1.5/10=0.15
Assume a stock has a short interest of 40 million shares, while the
average daily volume of shares traded is 20 million. Find out the
short interest ratio
Short interest ratio=short interest / Average daily volume of shares
=40/20=2

48. • When the ratio is less than 1 market is considered to be
weakening or overbought, likely to turn bearish.
• When the ratio value is above 1.5 considered to be
oversold and is likely to turn bullish shortly.
• The ratio can help an investor find out very quickly if a stock
is heavily shorted or not shorted versus its average daily
trading volume.

49. Odd-Lot Index
• Odd lot is an order amount of security that is less than the normal unit of trading
for the particular asset.
• Round lot: Standard quantities traded in stock exchanges, round lot=100 shares
• Shares less than standard quantity i.e. <100 shares
• Small investors are presumed to buy smaller number of shares than the normal
trading lot of 100 shares. These are known as odd lots and the buyers and sellers
of odd lots are called odd lotters.
• Odd lot index: Odd lot purchases / Odd lot sales
• Odd lot purchase is 21,651 shares and odd lot sales is 12,322 shares
• Odd lot index =21651/12322=1.75

50. Mutual Fund Cash Ratio
Mutual fund cash to Asset ratio used to determine the level
of liquidity of a mutual fund.
Low Cash Market High  Market Decline
High Cash  Market Bottom Market advance

51. Mathematical Indicators
Share price do not rise or fall in straight lines. Technical
analyst uses mathematical tools to overcome the difficulty
of display the underlying trend
a. Moving Average
b. Exponential Moving Average

52. Moving average
Moving Average indicate the trend of price movement.
Closing prices of shares are generally used for the
calculation of moving averages.
a. Simple Moving average
b. Exponential Moving Average

53. Simple Moving Average (SMA)
An average is the sum of prices of a share for a specific
number of days divided by the number of days.
Each average being calculated by including new price and
excluding old price

54. Problem
Days Closing Prices
1 33
2 35
3 37.5
4 36
5 39
6 40
7 40.5
8 38.5
9 41
10 42
11 44
12 42.5
13 42
14 44
15 45

55. Exponential Moving Average (EMA)
Exponential Moving average otherwise called as Weighted moving
average. It responds more quickly to prices compared to Simple
Moving average. It gives more weighting or importance to recent
price data. It helps to see price trends over specific time frames like
50 days or 200 days.
EMA=Price(t)×k+EMA(y)×(1−k)
where:
t=today
y=yesterday
N=number of days in EMA
k=2÷(N+1)​

56. Steps
• Compute the Simple Moving Average=(N-period sum)/N
N=Number of days in a given period
Period Sum=Sum of stock closing prices in that period
• Calculate the multiplier for weighting the Exponential Moving
Average
Weighted multiplier =2 / (n+1)
• Calculate the current Exponential Moving Average

57. Problem
Days Closing Prices
1 33
2 35
3 37.5
4 36
5 39
6 40
7 40.5
8 38.5
9 41
10 42
EMA for the first
day is taken as the
closing price of the
day itself.

58. Oscillators
- Oscillators are mathematical indicators calculated with the
help of closing price data
- It helps to identify overbought and oversold conditions
- Also helps to identify the possibility of trend reversals
- Indicators move across a reference point known as
oscillators
a. Rate of Change
b. Relative Strength Index

59. Rate of change indicator (ROC)
• ROC measures the rate of change of the current price as
compared to the price certain number of days or weeks
back.
• To calculate a 7 days ROC, each day’s price is divided by
the price which prevailed 7 days ago and then 1 is
subtracted from this price ratio.
ROC=[Current price / Price ‘n’ period ago] - 1

60. • ROC values may be positive or negative or zero.
• ROC values oscillates across the zero line
• When the indicator is above 0, the percentage price
change is positive (bullish).
• When the indicator is below 0, the percentage price
change is negative (bearish).

61. ROC chart

62. Relative Strength Index
• The Relative Strength Index Technical Indicator (RSI) is a price-
following oscillator that ranges between 0 and 100.
• Wilder introduced the Relative Strength Index
• He recommended 14-period RSI. Since then, the 9-period and 25-
period Relative Strength Index indicators have also gained
popularity.
• This is a powerful indicator that signals buying and selling
opportunities ahead of the market.

63. • The relative strength index formula is a momentum oscillator
formula that compares upward movements of the close price
with downward movements, and outputs values from 0 to
100. A value close to 100 indicates that the price is about to
move downward, and a value close to 0 indicates that the
price is about to move upward.
• RSI=100-[100/(1+RS)]
• Relative strength(RS)=Average gain per day/Average loss
per day
• For the calculation of 14 day RSI, the gain per day or loss per
day is arrived at by comparing the closing price of a day with
that of the previous day for a period of 14 days. The gains
are added up and divided by 14 to get the average gain per
day. Similarly average losses are calculated

64. • As an oscillator indicating either an overbought or oversold
condition, Wilder normalized his function so that it ranged from 0 to
100, with a value greater than 70 indicating an overbought
condition and a value lower than 30 indicating an oversold
condition. However, some technicians use different numbers
depending on the trend. An RSI greater than 50 can also indicate
an uptrend and an RSI less than 50 indicates a downtrend.

65. Trend
Trend is the direction of movement of share prices in the
market.
Rising Trend – Price move upwards
Falling Trend – Price move downwards
Flat Trend – Price moves within narrow range
• The formation of higher bottoms and higher tops indicates
a rising trend.
• The formation of lower tops and lower bottoms indicates a
falling trend.

66. Trend Reversal
• The change in the direction of trend is referred to as trend reversal.
• The reversal from rising trend to a falling trend is marked by the
formation of lower top and a lower bottom.
• The reversal from falling trend to a rising trend is characterised by
the formation of a higher bottom and a higher top
• When the trend reverses and begins to rise, it is recommended to
purchase of the share.
• When the trend reverses and begins to fall, sale is recommended.
• When there is flat trend investor should stay away from the market.

67. CHART PATTERNS
Chart patterns used to identify trend reversal and predict
the future movement of prices.
Classification of Chart patterns
a. Support and Resistance
b. Reversal patterns
c. Continuation patterns

68. Support and Resistance Level
• Support and resistance are price levels at which the downtrend or
uptrend in price movements is reversed.
• Support occurs when prices are falling, all low points are
connected by a horizontal line called support line
• Resistance occurs when share price moves upwards. The
horizontal line joining tops forms resistance level.
• Support and Resistance levels are used to indicates the point at
which a stock might not fall below or trade above without certain
amount of difficulty.

69. Support and resistance Pattern

70. Reversal Patterns
Reversal patterns are chart formations that tend to signal a
change in direction of the earlier trend.
a. Head and shoulder formation
b. Inverse head and shoulder formation

71. Head and Shoulder Formation
• This will occur at the end of a long uptrend.
• This formation exhibits a hump or top followed by
a higher top and another hump or lower top.
• The first hump known as left shoulder formed
when the prices reach the top under a strong
buying impulse

72. • The previous high followed by another high
volume advance, which take the price to a
higher top known as the head.
• A horizontal line joining the bottoms of this
formation is known as the neckline.
• Price penetrates this neckline, the formation of
head and shoulder pattern is completed.

73. Head and Shoulder
Pattern
Pattern occurs at
the end of bull
phase

74. Reverse Head and Shoulder pattern
Pattern occurs at
the end of bear
phase

75. • Double top formation, Triple top formation,
double bottom formation, Triple bottom
formation etc. are some of the other reversal
patterns.

76. Continuation patterns
• Continuation patterns are formed when the price enters a
consolidation or correction phase during a trend and
indicate the continuation of the preceding trend is highly
probable.
a. Triangles
b. Flags
c. Pennants

77. Triangles
• Triangles are formed when the price movements result in
two or more consecutive descending tops and two or
more consecutive ascending bottoms.

79. Symmetric Triangle – When price makes both
lower highs and higher lows
Ascending Triangle – These are formed by flat
top or equal highs and higher lows
Descending Triangle – These are formed by fat
bottom or equal lows and higher highs

80. Flags
• Flag pattern occurs mid-way between a sharp rise in
price or a steep fall in price.
• This formation looks like two trend lines forming two
parallel lines.
• The volume of trading expected to fall

82. Pennants
• The pennant formation looks like a symmetrical triangle.
The upper trend line formed by connecting the tops
stoops downwards, whereas the lower trend line formed
by connecting the bottoms rises upwards.
• The pennant is formed midway between either a bullish
trend or a bearish trend.

84. Dow theory
• Dow Theory was first introduced by Charles Dow, who was the
founder of Dow Jones and Company and the first editor of the Wall
Street Journal. This theory is based on the many editorials he had
written between the years of 1900-1902. Following his death,
William Hamilton continued the work.
• In 1932, the writings of these two men were collectively published
as the Dow Theory by Robert Rhea.
• The theory explains how the stock market can be used by
investors to understand the health of the business environment. It
was the first theory to explain that the market moves in trends.

85. Tenets of Dow Theory
1. The market discounts all news – Information available in the stock market is
already reflected in the price of stocks and indices.
2. The market has three trends – Primary trend, secondary trends and minor trends
3. Trends have three phases – Accumulation phase (beginning of primary upward
trend in bull market), public participation phase (investors enter the market based
market sentiments) and panic phase (more investors)
4. Indices confirm each other – Trend in the market cannot be verified by a single
index. All indices should reflect the same opinion.
5. Trends are confirmed by volume – Trend in the market supported by trading
volumes Upward trend- Volume rises with increase in price and volume falls with
decrease in price; Downward trend - Volume increases with fall in price and
Volume decreases with rise in price
6. Trends continue until definitive signals indicate otherwise – Market trend exist
despite any noise in the market.

86. Efficient Market theory
• Market efficiency refers to the degree to which market prices
reflect all available, relevant information. If markets are efficient,
then all information is already incorporated into prices, and so
there is no way to "beat" the market because there are no
undervalued or overvalued securities available.
• It is impossible to outperform the overall market through expert
stock selection or market timing, and the only way an investor can
obtain higher returns is by purchasing riskier investments.

87. Forms of EMH
Weak form of EMH
The weak-form EMH assumes that current stock prices fully reflect all historical
information, including past returns. Thus investors would gain little from technical
analysis, or the practice of studying a stock's price chart in an attempt to
determine where the stock price is going to go in the future.
Semi Strong EMH
The semi-strong EMH form assumes that stock prices fully reflect all historical
information and all current publicly available information. Thus, investors gain little
from fundamental analysis, or the practice of examining a company's financial
statements and recent developments.
Strong EMH
The strong-form EMH states that prices reflect not just historical and current
publicly available information, but insider information, too. Investors therefore can't
benefit from technical analysis, fundamental analysis, or insider information