Will using all the information to get the portfolio

This preview shows page 5 - 7 out of 24 pages.

will using all the information to get the portfolio investment ideas. The information they use are the news report, economic data, etc. If there is a company meet Puglia’s quantitative criteria, he and his research team will carry out further research on the company. The detail Puglia and his research team want to know is the competitors, customers, suppliers, etc. to have a more deep understanding towards the company. Therefore, it is not easy to sustain Puglia’s historical performance record in the future, because it needs a lot of effort and need the corporation form many party to getting the more accurate information on what to invest.
3. What are the implications for fund managers, if the market exhibits characteristics of strong, semistrong, or weak efficiency? First and foremost, weak form efficiency can be defined as stock market’s up-to-date prices fluctuate according to information like historical prices and trading volume. With market fully reflecting information, the investors in the stock market are deemed to be impossible to earn extra profit. So, it also indicates that all those information has no influence on the stock’s price level and prediction of price does not exist. In addition, extra profit earned by using technical analysis doesn’t exist in weakly-efficient stock market. This is because technical analysis has zero possibility of making excess return in weak form efficient market. According to case study, weak form level of efficiency claims that current price level of stocks followed a trendless random walk that has no relationship with past patterns. It also maintained that technical analysis that comprise of chart and data analysing doesn’t allowed the investors to earn the arbitrage profit. Yet, fundamental analysis in weak form level of efficiency can be profitable. If the market is weak form of efficiency, it’s possible for the fund managers to predict the future movement of the stock price by past information, they still can find out whether today’s stock price is the highest or the lowest. Then the managers can find right timing to issue stocks. For instance, newly issued share is best to be offered when the market is at the peak rather than the bottom. When the market is at the peak, newly issued share able to sell to investor at a high price which is higher return to the company that issuing it. Moreover, financial policy like announcement of financial statement, forecasts or news can be utilized by the fund managers. This can be beneficial to the company in obtaining capital. Fund managers can to invest in stocks in a careful manner after doing research on the financial statements announced by the company. Its possible for the fund managers to have higher return than the market. Weak form level of efficiency is under information efficiency of Efficient Market Hypothesis (EMH) which can be defined as the degree of information about the future returns of a stock reflects on its current prices. In other words, the outcomes of management decision will be reflected in the stock prices in an extent that is slower and less accurate than high form level of efficiency and semi-

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture