Question

As an investor what specific concepts can use and how to avoid investing in companies that are at risk of bankruptcy? What do you believe makes the market more efficient? Which are you more concerned with as an investor and why: "the magnitude issue" or "the selection bias issue?" Which do you prefer to use and why: fundamental analysis or technical analysis? Which effect do you believe has more of an impact on market performance and why: momentum effect, reversal effect, small-firm effect, neglected-firm effect, or book-to-market effect? Would you invest your money with a mutual fund manager ? why or why not?

Answer 1

We can we use the concept of risk control and risk elimination at the time of investment into going to be insolvent company or we can also associated with solvency risk because there is a high degree of risk related to survival of the company. there is a need for capital protection because capital protection will be helping the investor in order to save himself from getting is capital invested in such companies where the risk is higher and the return probability is very low.

markets are more efficient and there are aware investors and transparent management along with high degree of information transparency and lack of asymmetric information as well as presence of regulator's.

The selection bias issue is more associated with the investor as he will be open investing based upon his bias of selection of various samples which will not be representative of the true population

I Prefer to use fundamental analysis because it will provide me with long-term investment benefit and analysing through the qualitative and quantitative aspect.

Momentum effect in today's world is highly important because there is a trend of investing in those companies which are providing a high rate of return and there is a momentum in their performance and investor also changing them so performante stocks are the taste of the current market.