PPT Slide
“Fundamental analysis” predicts future prices based on factors in the real economy, both macro and micro.
Good fundamental analysis uses deep knowledge, unquantifiable and private information, and is often long-term.
There is consensus on a few important quantifiable fundamental factors. We use two of these: interest rates, and general stock prices.
The distinction between technical and fundamental analysis is questionable.
- Recent research has shown that exchange rates predict stock prices for some countries, and vice versa for others. See A Bivariate Causality between Stock Prices and Exchange Rates: Evidence from Recent Asia Flu by C. Granger, B. Huang, and C. Yang, UCSD