CFA Practice Question

There are 221 practice questions for this study session.

CFA Practice Question

Technical analysis is ______ than fundamental analysis.

A. easier
B. more difficult
C. more effective
Correct Answer: A

Technical analysis relies only on the analysis of past price and possibly volume data; therefore, it is generally regarded as being simpler and easier than fundamental analysis. There is no evidence that technical analysis is more effective.

User Contributed Comments 8

User Comment
kalps Technical analysis relies on past price movements to predict future outcome/growth prospects for equities
katybo not easy to me but different...to be able to identify the begining of a trend is hard work!
mtcfa Easy in the sense that once you have identified a trend (which may in fact be hard), your buy/sell decision is put in place and contingent upon future price movements. If that price movement occurs, your buy/sell decision is automatically triggered, i.e. easy.
Nightsurfer Technical analysis sounds less costly. I wonder if you can produce above average returns afer adjusting for expenses? This is where most mutual funds fall apart.
Masterkang Why does is sound less costly? You have to trade back and forth, creating transaction costs. Adjusting for expenses, technical analysis fails to beat market indexes.
bobert I think the idea is that technical analysis is less costly in research once you know what trends to look for. Trading also is not necessarily a huge cost. It all depends on the length of the trend I would have to say. It is the republican v. democrat debate of analysis.
johntan1979 It's the easy way out instead of pouring over tons of documents, reports and financial statements.

What comes easy goes easy too!
nigrelli This is as close to a put down as the CFA Institute is going to get. The idea that it believes that Technical Analysis is "easier" points to the institute's respect for fundamental analysis (where most CFAs work) and its belief in efficient markets (i.e. the near impossibility of beating the market. Good to understand for other questions.
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