IntroductionEconomic activities in modern countries, both capitalist and socialist, remain primarily driven by choices made to maximize the utility of characteristics productions. – at the micro and macro levels. Most countries have economic structures that ensure that much of this choice is made by the entrepreneur – who seeks to make a profit using capital – including the tools, technologies and buildings created and used by humans – to produce goods and services. Say no to plagiarism. Get a tailor-made essay on “Why Violent Video Games Should Not Be Banned”? Get the original essay Although capital is a broad concept with specific characteristics, the most economically relevant form is financial capital, which is money, credit and other forms of financial assets that entrepreneur (as an individual or business) uses to create wealth or acquire products and provide services. Such activity often takes place within the framework of a financial system consisting of financial markets (a geographic or virtual location where buyers and sellers trade assets such as stocks, bonds, currencies and derivatives), regulators (who monitor and regulate market exchanges to ensure fair pricing and practices) and institutions (who intervene and decide on the flow/allocation of assets).The concept of investment managementParticipation in the financial market requires the the allocation of assets in a transaction, in the hope of obtaining a return within a given time period; this allocation is called investment. Investment decisions are made by market institutions, including banks, non-bank financial companies, institutional investors, businesses, households and even individual investors. Making these asset allocation decisions relies on a complex combination of understanding an investor's needs, constraints, risk tolerance and knowing how to assess the future performance of financial securities with the right information. Investment management, which is the study of these financial instruments, their properties and the risk and return they face, becomes useful in helping stakeholders conduct robust predictive analyzes in financial markets to decide what investments would benefit them over time. There are two main schools of thought on the most useful approaches to analyzing headlines. This is the school that advocates fundamental analysis and technical analysis. Fundamental Analysis This refers to an approach to making investment decisions through a comprehensive assessment of economic, financial and other qualitative and quantitative factors that may affect the value of an asset in order to determine the value of an asset. intrinsic value of the asset. Fundamental analysis relies on two key assumptions: that financial markets are efficient and that the value of an asset increases based on the financial health of the company that owns it (in the case of stocks) or the direction prices of an asset of national importance. markets (in the case of currency trading). Fundamental analysis works from the assumption that the price of a stock does not necessarily reflect the current value of the stock and that the investment decision to buy or sell would be based on understanding the true value of the stock. the action. As such, fundamental analysis examines factors at macroeconomic levels,sectoral and institutional/company which not only affect the current price but can affect the future price when estimating the objective value of an asset and forecasting its future price movement. In conducting fundamental analyses, assessments begin by assessing macroeconomic factors. Measures used to conduct such assessments include a country's gross domestic product (GDP), interest rates, inflation, foreign exchange reserves, national productivity, consumer price index and their impacts on the financial health of the company. Sector or industry level analysis evaluates metrics such as market size over time (sometimes as contribution to GDP), supply and demand analysis, value of existing competition, and factors risk of the sector. At the company level, fundamental analysis evaluates metrics that provide information about the current and projected financial health of the company. These metrics include company earnings per share, valuation analysis (return on equity, price/earnings, price/book value, price/sales), ratio analysis (operational efficiency, operating profitability and solvency ratio) the quality of management. , debts and interest, and income. Additionally, a financial model requiring significant assumptions about the company's financial performance would be necessary to forecast future valuation. This type of analysis is often performed by non-high frequency investors and those who have a longer time horizon to work with. The approach is a little different for foreign exchange markets since what is traded here are not company shares. What is assessed are macroeconomic indices, a country's asset markets and its political scene. This analysis is a comparative analysis between nations that guides trading on one currency versus the other. The macroeconomic parameters analyzed are largely the same as for stocks, while asset market indices reflect the health of a country's real estate and stock markets. Political events would also help investors decide on fiscal stability and investment confidence. Beyond application, the theoretical basis of this school of thought is decision-making theory. This theory states that in making a choice about what to do, the rational decision would be one made from a systematic thought process that identifies the best among several alternatives that can be used. Simply put, this theory encourages the use of rigorous evidence in decision making. Fundamental analysis has several advantages, including that investors are able to develop sufficient business acumen to identify companies with strong corporate and financial governance. Through its sector-level analyses, fundamental analysis can help investors identify value drivers; such value positions could be high risk like the technology sector with its booms and busts, low risk like utilities with a fairly stable financial situation over a long period, seasonal/cyclical like the transportation sector which has daytime peak hours and seasonal positions. or non-cyclical as in the case of basic food products which remain in demand throughout the year. the contempt that technical analysis previously enjoyed. In fact, many critics view technical analysis as an untested approach. However, as it has become widely used, technical analysis hasproven particularly useful in determining when to buy or sell assets. Technical analysis begins with the key assumptions that the intrinsic value and any past trading information of an asset is already reflected in the market price, and that what needs to be known are changes in price trends of an asset over time due to changes in supply and demand. Essentially, technical analysis applies indicators that are not dependent on the financial health of the asset. Price trends are useful for predicting the future price of assets based on the assumption that price changes are directional (up or down) and that observable patterns, such as behavior and history of the market, often recur over non-random periods (daily, weekly, monthly). ). Technical analysis focuses on using past market data to study the technical details of the market, including the psychology and emotions of market participants, in order to chart future asset price trends. Trends are useful not only because they are believed to repeat and continue, but also because each trend is also believed to be influenced by nearby trends (the previous long trend, the next short trend, etc.) and all trends behave the same way. However, while similar, their behavior, while not entirely random, is also not automatic – it has many elements that remain random (Fidelity Investments, 2017). The main tool of technical analysis is the chart, which summarizes the movement of asset prices during specific time intervals to highlight trends and patterns. As such, technical analysis provides essential, easy-to-use tools for quick identification of trends, market volatility, trading volume, and a more comprehensive range of trading information over short periods of time. periods. Among technical analysts, an asset's trading volume, moving averages, and technical indicators such as stochastics and moving average convergence-divergence (MACD) are the metrics used along with charts to predict market trends and prices. It is important to note that technical analysis and non-dependence on information on the financial health of companies are based on efficient market theory (Utami and Nugroho, 2017). This hypothesis asserts that efficient markets are able to aggregate (through the forces of supply and demand) the value of an asset and fully reflect it in the asset's price. The Third School of Thought Although it is conventionally accepted that there are two schools of thought on investment management, recent years have seen the attribution of a third school of thought known as quantitative analysis. In many ways it represents both a blend of the two classical schools of thought and the logical endpoint of high-level computing that gave rise to technical analysis. Quantitative analysis refers to advanced statistical modeling using technical indicators to analyze excess return forecasts and fundamental indicators such as earnings and financial health of stocks. Merit and Demerit There are several advantages and disadvantages of fundamental and technical schools of thought. In explaining this, I will focus on these two elements only by first stating the merits and demerits of the fundamental school of thought and then stating those of the technical school of thought. There are currently three known merits of the school of thoughtfundamental: Stock prices are determined. by the performance of companies and their ability to make money. Stocks are a good investment choice when their market value is lower than their true intrinsic value. Fundamental analysis involves looking at real economic and market factors. The disadvantages can be stated as follows: Fundamental analysis is considered time-consuming by investors because it takes time to identify the information needed to decide. The value of stock prices is open knowledge because it is accessible to everyone In the case of technical analysis, the merits The relationship between technical and fundamental analyzes Complementarity Historically, fundamental analysis was considered the only A school of thought useful, but complex computing and innovative trading methods such as algorithmic trading have made technical analysis much more relevant. In today's market, an effective approach to investment management would not rely on a single method. The primary objectives of investment management, which are to use a rational and disciplined approach to prevent loss of assets while achieving and maintaining profits, within an acceptable risk range, would require both a complementary application of both analysis approaches based on an understanding of their strengths and weaknesses. . - It is accepted that the main contrast between the two approaches lies in their central application. Indeed, fundamental analysis serves to guide the decision to invest long-term in an asset based on an assessment that the essential valuation of the asset, although not currently reflected in the price current asset, would be in its future price; While technical analyzes are used for short-term trading to recover an asset and return it. Or, as one leading American investor explains: "Fundamental analysis really determines which stocks we want to own." But the timing of buy and sell decisions is fairly evenly split between technical and fundamental.” Mishra further makes this point in his study which presents several academic literatures which show that in the short term, technical analysis outperforms fundamental analyzes in choosing profitable trades. These applications are not necessarily contradictory, however, despite the claims of purists of both schools of thought. Such complementarity is called “rational analysis”. Therefore, an investor who relies primarily on fundamental analysis may decide to conduct this analysis to identify an asset that is currently undervalued, and then borrow from the tools of technical analysis to decide when to buy that asset at low price (entry), then sell at a higher price (exit). This combination is particularly useful when an asset is completely oversold and entering a position too early could result in a loss of profit. Additionally, a technical analysis investor may decide that the price trend of an asset would change at a given time and then apply fundamental analysis to measure the profit margin he or she would expect to earn from that change. Despite this complementary utility, understanding the differences also matters.DifferencesThe differences in the two analyzes are broad and range from key assumptions, information analyses, timing of application, and directional perspectives. A few of them are described below. Market Efficiency Perspectives: Although both accept that the market is efficient, the meaning of this efficiency differs. In analysis.