3 Key news paper articles can have an impact on the way you invest :
The Economic time reported today and I quote :
"Indian stocks best performing among Asia in August: Citigroup
Indian stocks have emerged as the best performing lot among Asian equities, as it recorded only a marginal loss during the month, while a majority of others in the region posted higher negative return, a Citigroup report says. "
The Wall Street Journal reported :
"Europe's Growth Slowed in August
Economic growth in the 15 countries that use the euro slowed in August, according to a closely-watched survey, adding to evidence the euro-zone economy could slip into recession this year. "
The Financial Times reported:
"Pound suffers worst month since 1992
The pound has suffered its worst month against the dollar since October 1992, the month after sterling’s ejection from the European Exchange Rate Mechanism"
Now one can truely use the quote India Shining.
Friday the 29th of August saw Indian stock markets perform well based on the good inflation numbers and GDP expectations. Another market anamoly to remember.
After a week of low activities - investors were expecting a calm before the storm effect, but positive actions from around the world and strong global cues helped the Indian markets out perform global expectations.
Hasn't it always been the best time to work in India ? :-)
Friday, 29 August 2008
Saturday, 23 August 2008
Market Anamolies ..!!
Before we begin discussing about the various anamolies that the stock market experiences, it would wise to define these financial jargons.
Efficiency as we all know can be divided in to 3 parts : the weak form efficiency, semi-strong form efficiency and the strong form efficiency. Weak form efficient market prices reflect all the past price information, the semi-strong form reflects all the public information available and the strong form reflects all the public and private information available.
Hence we can say that:
The strong form efficient market = Weak form efficient + Semi-strong form efficient Markets.
An Anamoly is the behaviour inconsistent with Models and/or Market Efficiency.
The Anamoly we would be discussing is the price behaviour which is inconsistent with the semi-strong form of markets.
Some of the well known anamolies are the small firm effect, the book-to-market ratio, the weekend and month effects, post earnings announcement drifts, short run momentum, market crash of 1987 and excess volatility.
These anamolies help explain the price behaviour in the stock market. Also recently we have seen effects such as the take-over news effect, merger and acquisitions announcement effects, and the most recent one of Anticipation Announcement Effect ( the announcement by a well know financial figure of what he/she expects from the market ).
In order to be a successful in the stock market, one has to be good with numbers and understand that at the end of the day its human psychology. Herding behaviour is consistent throughout. Unless you want to be a Trader, there is nothing much one has to know to make small consistent profits in the stock market. But be warned, its addictive.
Efficiency as we all know can be divided in to 3 parts : the weak form efficiency, semi-strong form efficiency and the strong form efficiency. Weak form efficient market prices reflect all the past price information, the semi-strong form reflects all the public information available and the strong form reflects all the public and private information available.
Hence we can say that:
The strong form efficient market = Weak form efficient + Semi-strong form efficient Markets.
An Anamoly is the behaviour inconsistent with Models and/or Market Efficiency.
The Anamoly we would be discussing is the price behaviour which is inconsistent with the semi-strong form of markets.
Some of the well known anamolies are the small firm effect, the book-to-market ratio, the weekend and month effects, post earnings announcement drifts, short run momentum, market crash of 1987 and excess volatility.
These anamolies help explain the price behaviour in the stock market. Also recently we have seen effects such as the take-over news effect, merger and acquisitions announcement effects, and the most recent one of Anticipation Announcement Effect ( the announcement by a well know financial figure of what he/she expects from the market ).
In order to be a successful in the stock market, one has to be good with numbers and understand that at the end of the day its human psychology. Herding behaviour is consistent throughout. Unless you want to be a Trader, there is nothing much one has to know to make small consistent profits in the stock market. But be warned, its addictive.
Saturday, 9 August 2008
RIde with the slide ---
Its been quite a while since my last post - infact its been months. During this period I have been doing some much required research work for my dissertation. The one thing I have learnt which seriously takes no MSc in Finance is that the market does not work on rules or mathematical formulae.
We have been taught various financial lingos like - correlation, in the money, options, derivatives etc. Although interpretting the various trends in the market is easier now, its not predictable at all. The fact is that only 27% of the financial market is run by taught professionals, the rest are self-taught and are people in other professions as well.
If that be the case, then why is it that we try so hard to understand how the market works ? Its one of those questions that cannot be answered. Like in medicine - my friend said they have been doing research for ages on how the brain works. There is no concrete answer, but a lot of new discoveries and the same happens with the financial market. Every study brings up a new problem and hence the quest for another solution.
"Mounting optimism that the US economy would outperform the rest of the developed world pushed the dollar to multi-month highs against leading currencies this week as the oil price resumed its downward path, providing support for equity markets." - This was the opening paragraph on the 8th of August 2008 for an article titled 'Overview: Dollar rallies while oil slides' in the Financial Times.
My research work lead me to the conculsion that there was a positive correlation between oil prices and the value of the US dollar since it was denominated in USD. But now I am confused.
Correct me if I am wrong but the article suggested that a gentleman's comments made the dollars price go up - OPTIMISM !!!!
Well honestly trying to understand the whole debacle has left me thirsty for some serious answers. Whilst I go refresh my brain with more knowledge to complete this article - please feel free to leave some comments and suggestions that might help.
We have been taught various financial lingos like - correlation, in the money, options, derivatives etc. Although interpretting the various trends in the market is easier now, its not predictable at all. The fact is that only 27% of the financial market is run by taught professionals, the rest are self-taught and are people in other professions as well.
If that be the case, then why is it that we try so hard to understand how the market works ? Its one of those questions that cannot be answered. Like in medicine - my friend said they have been doing research for ages on how the brain works. There is no concrete answer, but a lot of new discoveries and the same happens with the financial market. Every study brings up a new problem and hence the quest for another solution.
"Mounting optimism that the US economy would outperform the rest of the developed world pushed the dollar to multi-month highs against leading currencies this week as the oil price resumed its downward path, providing support for equity markets." - This was the opening paragraph on the 8th of August 2008 for an article titled 'Overview: Dollar rallies while oil slides' in the Financial Times.
My research work lead me to the conculsion that there was a positive correlation between oil prices and the value of the US dollar since it was denominated in USD. But now I am confused.
Correct me if I am wrong but the article suggested that a gentleman's comments made the dollars price go up - OPTIMISM !!!!
Well honestly trying to understand the whole debacle has left me thirsty for some serious answers. Whilst I go refresh my brain with more knowledge to complete this article - please feel free to leave some comments and suggestions that might help.
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