What approach attempts to chart historical price movements of financial instruments to predict future price movements...

What approach attempts to chart historical price movements of financial instruments to predict future price movements instead of trying to calculate the instrument's fair price? Historical Price Chartist Chartalist Market price

Solutions

Expert Solution

Answer: Prices of stocks and other financial instruments are based on past historical prices also.

If we take the example of Shares, we can predict future prices on the basis of following two approaches:

Trend analysis- Analyst can analyze past trend of a particular stock or index, if stock is over ought and trading on 52 weeks high then there may be a slight sell of and profit booking can be seen in the stock, if on the other hand, stock is oversold then buying can be seen as short positions will be covered. Past prices influence the future movements.

Moving averages- Analyst analyzes 30 days, 50 days and 200 days moving averages and exponential moving averages, moving average is calculated by taking last 30 days closing prices of stocks and dividing the sum by number of days (If we calculate 50 days then 50 days data will be taken). If a share trading above its moving average then it is a good buy for short to long term and vice versa.

jeff jeffy answered 1 month ago

Next > < Previous

Related Solutions

The Capital Asset Price Model (CAPM) is a financial model that attempts to predict the rate...

The Capital Asset Price Model (CAPM) is a financial model that attempts to predict the rate of return on a financial instrument, such as a common stock, in such a way that it is linearly related to the rate of return on the overal market. Specifically, RStockA,i = β0 + β1RMarket,i + ei You are to study the relationship between the two variables and estimate the above model: RStockA,i - rate of return on Stock A for month i, i=1,2,⋯,59....

The Capital Asset Price Model (CAPM) is a financial model that attempts to predict the rate...

The Capital Asset Price Model (CAPM) is a financial model that attempts to predict the rate of return on a financial instrument, such as a common stock, in such a way that it is linearly related to the rate of return on the overal market. Specifically, RStockA,i = β0 + β1RMarket,i + ei You are to study the relationship between the two variables and estimate the above model: iRStockA,i - rate of return on Stock A for month i, i=1,2,⋯59....

The Capital Asset Price Model (CAPM) is a financial model that attempts to predict the rate...

The Capital Asset Price Model (CAPM) is a financial model that attempts to predict the rate of return on a financial instrument, such as a common stock, in such a way that it is linearly related to the rate of return on the overal market. Specifically, RStockA,i = β0 + β1RMarket,i + ei You are to study the relationship between the two variables and estimate the above model: iRStockA,i - rate of return on Stock A for month i, i=1,2,⋯59....

A time series model is a forecasting technique that attempts to predict the future values of...

A time series model is a forecasting technique that attempts to predict the future values of a variable by using only historical data on that one variable. Here are some examples of variables you can use to forecast. You may use a different source other than the ones listed (be sure to reference the website). There are many other variables you can use, as long as you have values that are recorded at successive intervals of time. Currency price GNP...

Use the competitive model to predict movements in price and utilization due to changes in factors...

Use the competitive model to predict movements in price and utilization due to changes in factors that influence supply and demand for health services

Use the competitive model to predict movements in price and utilization due to changes in factors...

Use the competitive model to predict movements in price and utilization due to changes in factors that influence supply and demand for health services

Analysis of historical financial performance and current financial conditions inform operations and future strategies. What factors...

Analysis of historical financial performance and current financial conditions inform operations and future strategies. What factors and financial documents would you review in order to perform a financial performance analysis? How do they inform you?

How would you describe Danielle Oviedo’s approach to leadership? What would you predict about Danielle’s future...

How would you describe Danielle Oviedo’s approach to leadership? What would you predict about Danielle’s future success as a leader? Why?

Normalizing adjustments to a firm's historical financial statements may be necessary to apply the income approach....

Normalizing adjustments to a firm's historical financial statements may be necessary to apply the income approach. Such adjustments may be necessary to measure a firm's true economic earnings, which may differ from the amounts reported on its financial statements. These kinds of adjustments to historical financial statements are relatively common when valuing privately-owned businesses because private owners tend to run their firms differently than managers of public firms who have many shareholders and are regulated by SEC. Forensic accounting skills...

What do the basic models of international factor movements between two countries predict with regard to...

What do the basic models of international factor movements between two countries predict with regard to the impact on factors from each country and overall output? In reality are the results the same as would be predicted in this model? If they are different, explain why this is the case.

Subjects