  Analysis Into The Stock Market From An Investment Mechanism Perspective (2006) Ref: econ0004 16,000 words – 100 pages in length Excellent use of literature Excellent use of models In-depth analysis Outstanding piece of work The major role of a stock exchange is providing a means for corporations to raise funds through the sale of stocks and subsequently assessing the worth of these shares and securities. It also makes provision of an efficient mechanism, where investors can get up-to-date price information of stocks and can buy and sell shares. The stock market behaviour shows the tendency to rise or fall sharply within a short period of time. The statistical measure of this behaviour is known as volatility. It is typically measured by the standard deviation of the return of an investment. Real-world stock markets are volatile and express such traits as overvaluation, cycles and crashes. The stock market is not a reliable price-setter and it sometimes misinterprets the economic signal considerably. The investment process therefore is consisted on the discovery and purchase of stocks that are undervalued, buying and holding them and then selling when they are of good value. A fundamental saying of the market is “Buy when they’re low and sell when they’re high” (Keane 1883). Successful identification of undervalued shares is believed to be possible through a study of important available information. Many researches have been made on this topic that suggests that stock market returns can be predicted by a range of financial and macroeconomic variables. Numerous studies reported that fundamental variables like cash flow and earnings yield have predictive powers. It is believed that stocks with high earnings to price ratios make significantly higher returns than stocks with low earnings to price ratios (Basu 1977). Many researchers, employing many different methodologies, have recognized an extremely strong positive relationship between measures of financial market development and real economic performance. “Losers” are recognized as stocks that have had poor returns over the past three to five years and "winners" as those stocks that had high returns over a similar period. The finale of this notion is that losers have much higher average returns than winners over the next three to five years (DeBondt and Thaler 1985). The stock market is quite a complicated system which itself is a part of much more complicated system, the economy. Under the notion of the stock market as a mechanism used by investors to channel funds to companies the importance of a successful sock valuation for investors is very high, since investors base their market predictions and ultimately buy or sell decisions on such valuation. As such a lot of effort has been made to correctly predict the future of stock market. This research would try to explain why theories and models have failed to explain the exact behaviour of the stock market and also to find the underlying discrepancies of these theories that result in such disappointment. Chapter One: Introduction Background of Subject Matter Statement of the Problem / Research Issue Scope and Limitations Aims and Objectives Research Structure Chapter Two: An Orientation To The Stock Market And Investment Theories Introduction The stock Market – An Introduction Methods and Approaches to Share and Stock Market Analysis Fundamental Analysis Dividends Company Earnings Ratio Analysis Interest Rates Technical Analysis Technical Indicators Moving Averages Bollinger Bands (BB) Relative Strength Index (RSI) Moving Average Convergence Divergence (MACD) Volume Oscillator Money Flow Index (MFI) Stock Charts Pivot Point Analysis The Elliot Wave Theory Cup and Handle Investment theories Modern Portfolio theory The Capital-Asset pricing model Conclusion Chapter Three: Research Methodology Introduction Research philosophy Positivism Interpretivism Realism The Research Philosophy Adopted Research Approach Deduction Induction Research Approach Adopted Research Strategy Time Horizons Data Collection Advantages of Secondary Data Disadvantages of Secondary Data Chapter Four: Analysis And Discussion Introduction Share Valuation - Dividends or Company Earnings? TESCO PLC Case Study Empirical Evidence on Dividend Discount Model and Price to Earnings Approach Dividend Growth Model Company earnings – Dividend Valuation Model with Price – to earnings approach Price earnings ratio Ratio Analysis Earnings per Share (EPS) Dividend Cover Acid Test Ratio Discussion on Findings from Fundamental Analysis Technical Analysis Based on Key Technical Indicators Moving Averages Bollinger Bands (BB) Relative Strength Index (RSI) Moving Average Convergence Divergence (MACD) Volume Oscillator Money Flow Index Discussion on Findings from Technical Analysis Conclusion Chapter Five: Conclusions And Implications Introduction Imperfections of Fundamental Analysis The Dividend Growth Model Dividend Valuation Model with Price – to earnings approach Ratio Analysis Interest Rates Imperfections of Technical Analysis Implications of the Efficient Market Hypothesis Recommendations Conclusion Appendices Bibliography 
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