Share Trading Assignment
Student no. 497432
Unit Code U21083
Due Date 19/02/2013
This project is about whether or not an investor with only publicly available information is able to “beat the market”. We have £100,000 which we can invest in the stock market however this amount must be split into two portfolios. Each portfolio will be made up of investments chosen through theories and strategies which come from either the fundamental analysis or technical analysis approaches.
Fundamental analysis is method which looks at fundamental information such as competitive advantage, earnings growth, market share and quality of management to indicate a security’s future value.
Technical analysis is the other basic trading …show more content…
For the second technical analysis method, firms were selected on the basis of the Small Firm Effect. A study by Stoll & Whaley (1983) showed that “investors can earn risk-adjusted excess returns after transaction costs by holding small firms for relatively short holding periods.” Also, the results of research done by Banz (1981) showed that “in the period from 1936-1975; the common stock of small firms had, on average, higher risk-adjusted returns than the common stock of large firms”. As the securities will only be held and sold over a maximum period of four months this method should be able to make positive returns through this method based on these results. To