AuthorTopic: Please help me on this 3 questions? Thanks!
ahsheng
@2004-10-16 07:40:55
2. If the markets are efficient, there is no need to collect any information as all information is reflected in the price. However, we see a number of technical analysts claiming that they are able to make money through technical analysis. Does this imply that the markets are inefficient? Explain.

3. Fundamental analysis is usually conducted through top down approach. Explain the outcome of industry analysis from the view point of the goals of fundamental analysis.

4. An increase in the amount of dividends paid by companies usually result in the increase of prices in the market. What is the rationale that can explain this behavior?
Ali1
@2004-10-24 07:55:59
2. That would be strong form efficient. (Technical analysis, or the ability/perception of being able to use past performance as a measure of future performance)
So, it is still possible to have an efficient (Semi Strong / Weak form efficient) market, with technical analysts making money.

Have heard other explanations saying this is wrong, but this makes sense to me,

3. Not quite sure what the question is asking...

4. Dividends are a sign of managements belief in it's future earning potential. Management is unlikely to reduce the dividend once it increases it, so as a sign to investors, it paints a brighter picture for future growth.

Also, a fundamental reason for owning stocks is dividends. If you never got dividends, you wouldn't be reimbursed for your capital injected into the company.
fariz
@2004-10-25 03:12:22
Q2:

In an efficient market, technical analysis is useless
Matt
@2004-10-27 12:52:11
While I agree with Ali's explanation, I think that it's safe to add that price appreciation is an equally strong motivator and return method to investors. There are plenty of firms that do not pay dividens but return $ to shareholders through other methods. If the stock price is a measurement of future earnings and the growth assumption is contrary to your own, buy the stock, realize the appreciation, make a return. One can create synthetic dividends through sale of pro rata shares if dividends are required.
I agree with his point that an increase in dividends is partially psychological. The street translates the increase as management confidence in future earnings and perhaps growth.

CFA Discussion Topic: Please help me on this 3 questions? Thanks!

To post a new topic or reply to a topic, please log in or register for a free user account.

Your review questions and global ranking system were so helpful.
Lina

Lina