Analysis Into The Stock Market From An Investment Mechanism Perspective

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”.

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.

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. 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.

  • 16,000 words – 100 pages in length
  • Excellent use of literature
  • Excellent use of models
  • Good In-depth analysis
  • Well written throughout
  • Ideal for Economics and finance students

1: Introduction
Background of Subject Matter
Statement of the Problem / Research Issue
Scope and Limitations
Aims and Objectives
Research Structure

2: An Orientation To The Stock Market And Investment Theories
The stock Market – An Introduction
Methods and Approaches to Share and Stock Market Analysis
Fundamental Analysis
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

3: Research Methodology
Research philosophy
The Research Philosophy Adopted
Research Approach
Research Approach Adopted
Research Strategy
Time Horizons
Data Collection
Advantages of Secondary Data
Disadvantages of Secondary Data

4: Analysis And Discussion
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

5: Conclusions And Implications
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



Stock Market Investment Mechanism Perspective Dissertation
Stock Market Investment Mechanism Perspective Dissertation

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