AGEC 420, Lec 281 Agec 420 TradeSim Quiz 5 (review) and 6 Fundamental Analysis Technical Analysis

AGEC 420, Lec 282 Markets Bot 1 MidAm Dec 2.29¼, March 6 Close ? $ +/- Tue., Apr ½ -$47.50 CBOT: Cattle:

AGEC 420, Lec 283 Fundamental Analysis The use of information about supply, demand and other economic factors to forecast price.

AGEC 420, Lec 284 Fundamental Analysis Typically involves: a) gathering info on supply and demand USDA reports, weather, political factors, substitutes b) translating quantity information into a price prediction regression analysis

AGEC 420, Lec 285 Fundamental Analysis Is it useful or worthwhile for the small hedger or speculator? Purcell, Chapters 3 --> YES Malkiel, Chapters 5 and 7 --> NO

AGEC 420, Lec 286 Fundamental Analysis - Livestock Long run: use both Supply and Demand information Short run: use only Supply information Cattle on Feed numbers Weights

AGEC 420, Lec 287 Technical Analysis The use of historical information on prices, price patterns, volume of trade etc to forecast future price movement Typically involves use of: a) Charts b) Other mathematical constructs - eg moving averages

AGEC 420, Lec 288 Technical Analysis Is it worthwhile? Purcell, Chapters 4 and 5 --> YES Malkiel, Chapters 5 and 6 --> NO Example:

AGEC 420, Lec 289 Efficient Market Theory Except for long-run trends, stock prices are difficult (perhaps impossible) to predict For futures prices there is no long run!

AGEC 420, Lec Versions of the theory weak cannot predict future prices using past prices semi-strong cannot predict prices using all published information strong cannot predict ….. using any information

AGEC 420, Lec 2811 The Bar Chart Axes show price and time Vertical bars –price range (day or week) top of the bar --> highest price bottom --> lowest price tick on RHS: closing price

AGEC 420, Lec 2812 Charts Two basic “categories” of chart patterns 1. Trends and trend reversals Rationale: bandwagon effects, gradual release of information

AGEC 420, Lec 2813 Charts “Categories” of chart patterns 2. Resistance and support planes and the associated topping and bottoming patterns Rationale: “investors memory” sell when it gets back to the price they bought at buy when it gets down to where they wish they had bought

AGEC 420, Lec 2814 Charts - the argument against.. 1. Trends: How do you know it’s a trend? Once you recognize it, you’ve missed it! 2. Other patterns If they had any value, anticipatory action would destroy them!

AGEC 420, Lec 2815 Evaluation A = very low --- E = very high 1. Effectiveness as a teacher 2. Clarity of presentation 3. Ability to explain 4. Availability outside class

AGEC 420, Lec 2816 Mid-term Evaluation A = very low --- E = very high 5. Amount you have learned 6. Pace (A= too slow, E = too fast) 7. Difficulty (A=too easy, E=too difficult) 8. Overall evaluation Put specific suggestions for improvement, complaints, etc on the back.