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Technical And Fundamental Anomalies. Paradoxes Of Modern Stock Exchange Markets

Author

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  • BAKO Elena Dana

    (Babeș - Bolyai University, Faculty of Economics and Business Administration, Cluj-Napoca, Romania,)

  • SECHEL Ioana Cristina

Abstract

This paper continues the series of researches about the paradoxes of modern stock exchange markets and their impact on the real economy, addressing this time the most important technical anomalies but also fundamental anomalies, which can be observed on the financial markets. As we mentioned in several previous articles, the paradoxes of stock exchanges are related to potential contradictions that arise in relation to a generally accepted truth. A lot of researches in the field of stock market investment focused on finding the answer to the question whether historical prices can be used to predict future prices for listed securities. Complex forecasting methods were created to clarify this aspect. Thus, technical analysis is a method of forecasting the price movements and trends of the market in the future, by studying the market graphs (including here both, the price of the listed instruments and the volume of transactions). The fundamental anomalies refer to the anomalies in trading financial instruments, and to the elements of fundamental analysis. The basic principle of fundamental analysis refers to the fact that the market price of any financial instrument is the result of supply and demand for that instrument. Both the supply and demand that finally determine the price of a financial instrument, are under the influence of various factors. Market's analysts monitor various economic indicators and examine the market reports, to detect changes that may occur in the economy. The fundamental analysis attempts to predict prices and the overall market development by analyzing some economic indicators, political or social factors which are likely to influence the stock exchange prices. Both technical and fundamental anomalies have a major impact on price formation for financial instruments which are traded on stock exchanges, and are able to offer to warned investors higher earnings.

Suggested Citation

  • BAKO Elena Dana & SECHEL Ioana Cristina, 2013. "Technical And Fundamental Anomalies. Paradoxes Of Modern Stock Exchange Markets," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 37-43, July.
    • Handle: RePEc:ora:journl:v:1:y:2013:i:1:p:37-43
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    References listed on IDEAS

    as
    1. Fama, Eugene F & French, Kenneth R, 1992. "The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, vol. 47(2), pages 427-465, June.
    2. Lakonishok, Josef & Shleifer, Andrei & Vishny, Robert W, 1994. "Contrarian Investment, Extrapolation, and Risk," Journal of Finance, American Finance Association, vol. 49(5), pages 1541-1578, December.
    3. Banz, Rolf W., 1981. "The relationship between return and market value of common stocks," Journal of Financial Economics, Elsevier, vol. 9(1), pages 3-18, March.
    4. Dharan, Bala G & Ikenberry, David L, 1995. "The Long-Run Negative Drift of Post-listing Stock Returns," Journal of Finance, American Finance Association, vol. 50(5), pages 1547-1574, December.
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    Cited by:

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    2. Zain UI Abideen & Zeeshan Ahmed & Huan Qiu & Yiwei Zhao, 2023. "Do Behavioral Biases Affect Investors’ Investment Decision Making? Evidence from the Pakistani Equity Market," Risks, MDPI, vol. 11(6), pages 1-32, June.

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    More about this item

    Keywords

    stock market paradox; technical anomalies; fundamental anomalies; trend lines;
    All these keywords.

    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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