Investments Lecture 6

According to the STRONG FORM of Efficient Market Hypothesis....

• Fundamental analysis works.
• Technical analysis works.
• We can beat the market with insider info.
• Only the Brownian motion can give us a hint.

At the P/E...

• We divide the price with the profit.
• We divide the price with the profit per share.
• We calculate the free float %
• We divide the profit with the price.

At the BV/P:

• The higher the better.
• The lower the better.
• BV=total book value of the asset side.
• BV=total book value of shareholders' equity.

A basic belief of fundamental analysts is...

• There is a basic intrinsic value.
• There is no basic intrinsic value.
• Not all the public information is in the price.
• All the public information is in the price.

Part of the industry analysis is...

• Macroeconomic analysis
• Goverment policy.
• Sector-rotation.
• Financial Statement Analysis .

The Unemployment rate...

• is the ratio of actual output from factories to potential output.
• is about the free capacities of the economy.
• is about economic activity in manufacturing.
• does not matter.

Supply shock:

• Changes in the taxes.
• Changes of the Oil Price.
• Changes in goverment spending.
• Freezes, floods, or droughts.

Fiscal Policy is...

• Tax Raise...
• Change in the base rate of the central bank.
• Subsidizing the families.
• When the central bank buys FX.

Coincident Indicators change usually move...

• in advance of the cycle.
• after the start of the cycle.
• directly with the economy.
• randomly compared to the cycle.

The degree of operating leverage show us...

• how sensitive profits are to changes in sales.
• how sensitive the sales is to changes in the prices.
• what is the ratio of debt in the whole book.
• how sensitive profits are to the percentage of debt.