The basic analysis method, also known as fundamental analysis, is based on the basic principles of economics, finance, accounting and investment, to analyze the basic elements that determine the value and price of securities, so as to evaluate the investment value of securities, judge the reasonable price of securities, and finally put forward corresponding investment suggestions. Any asset has its intrinsic value. When the market price is not equal to its intrinsic value, there will be a "pricing error". The main content of the basic analysis method is to analyze the factors that can affect the price of securities, such as macro-economy, industry factors and company-specific factors. The main advantage of basic analysis method is that it can fully grasp the basic trend of securities prices and is suitable for forecasting securities prices with long fluctuation period; The disadvantage is that the guidance to short-term investors is weak and the prediction accuracy is low. If these basic trends are predictable, they are not easily influenced, so the basic analysis method is suitable for long-term investment.
Technical analysis method is a technical method that takes the past and present market behavior of the securities market as the analysis object, explores some typical changing laws of the securities market by using the methods of chart, logic and mathematics, and predicts the future changing trend of the securities market accordingly. The basic assumption of this method is that "history will repeat itself". It is based on the existing price and volume of the securities market, and uses graphic analysis methods, such as K-line, tangent, wave and so on. Exponential analysis methods, such as trend index (DMI) and energy tide (OBV), also known as the balanced volume method, were put forward by glanville in 1963. The energy tide is to quantify the trading volume and make it a trend line. With the trend line of stock price, we can infer the market atmosphere from the relationship between price change and volume increase and decrease. ) and deviation rate (BIAS) are indicators to measure the degree to which the stock price deviates from the moving average. ), etc. Analysis methods of volume-price relationship, such as classical theory of volume-price relationship and Gramby's theory of volume-price relationship. The advantage of technical analysis method is that it is based on market data, and the response to the market is relatively direct, and the result is closer to the market reality. The analysis conclusion is timely and has strong guiding significance for short-term investment. Its disadvantage is that the scope of consideration is narrow and it cannot effectively judge the long-term trend of the market.
For individual investors, fundamental analysis and technical analysis are the most common and important methods. Let's compare these two methods. Basic analysis can explain the reasons of price rise and fall from a logical point of view, while technical analysis has more advantages in choosing the opportunity to enter the market. Generally speaking, technical analysis has its own unique advantages compared with basic analysis: first, technical analysis can reflect the changes of price trends in advance and has a leading advantage. At the beginning of some of the most famous bull or bear markets in history, there was hardly any information showing that the economic base had changed. By the time the good news or bad news comes out, a new trend has formed. Second, technical analysis can determine the timing of entry. Although the conclusion of basic analysis is predictive, it is easy to cause premature entry into the market. Technical analysis can give full play to this role. When the chart sends a buy signal, the technical analyst can buy at any time. Especially in the futures market, its leverage determines that timing is the key to the success or failure of trading. At the wrong time, traders may still lose money even if they accurately grasp the general trend. Thirdly, the technical analysis is flexible, applicable to any trading medium and any time scale, and can be applied to the stock market, futures, options market, foreign exchange, gold market and so on. However, the basic analysis is very limited at this point. Because it is factor analysis, before analyzing a market, analysts must become experts in this market and understand the fundamentals of these markets, and the information on economic fundamentals is too complicated. So basic analysts often pay attention to one thing and lose another. Fourth, technical analysis can reflect the psychology and mood of the market. Pure basic analysis is a logical method, assuming that investors are rational, but in fact, traders in financial markets are often irrational and psychologically biased, which affects investors' behavior and thus has an important impact on price trends. Because the development of these emotions takes time to complete, technical analysts have the opportunity to identify these psychological changes in the early stage of the trend and buy or sell with confidence.
Portfolio analysis is an analysis method to achieve the balance between investment income and investment risk by constructing portfolio investment of various securities according to the different risk-return characteristics of different securities. In terms of processing, it obtains the portfolio coefficient of each security in the portfolio by solving the problem of maximizing the return under specific risk conditions or minimizing the risk under specific risk conditions, and then analyzes the portfolio investment. It can be divided into traditional portfolio analysis methods and modern portfolio analysis methods. The traditional analysis method is to reduce the unsystematic risk according to the different reactions of different securities to the same systemic risk; Modern portfolio analysis method is a quantitative portfolio management method to achieve the best balance between investment returns and risks, such as Markowitz's mean variance model, Sharp and lintner's capital asset pricing model and Ross's arbitrage pricing theory. The advantage of portfolio analysis method is to classify and quantitatively describe risks in investment analysis, and to seek the balance between returns and risks. It is proved theoretically that portfolio investment can effectively reduce the unsystematic risk, and at the same time, it can also solve the optimal proportion relationship of securities in portfolio by quantitative method, thus overcoming the blindness of traditional portfolio method in determining the proportion of securities in each portfolio, and thus achieving the optimal balance between investment income and risk. The disadvantage is that it needs to calculate complex models; The hypothetical conditions of the securities market are too harsh, and even these conditions are far from the actual market. If the development of the securities market is not very mature, some conditions cannot be met; Calculating the proportion of portfolio needs a lot of data support, and the model does not take into account that some securities can not build a portfolio at all. Portfolio analysis method is limited by market conditions, such as the existence of transaction costs and the understanding of information, so it is more suitable for institutional investors and is combined with fundamental analysis. Considering the balance between risk and return, the return of securities portfolio is sometimes low, but the return is relatively stable, which is more suitable for the capital operation of fund companies and social security companies.
Behavioral financial analysis method originated from the "abnormal phenomena" that constantly appeared in the securities market in 1980s, which were contrary to the classical theory and could not be explained by the classical theory, such as weekend phenomenon (some information of next Monday was reflected in the stock price of this Friday in advance) and holiday phenomenon. Some investors have made use of these "abnormal phenomena" to invest, and have indeed achieved extraordinary returns. Therefore, this method takes these "anomalies" as the research object, starts with questioning the standard financial theory, and studies the psychological behavior of investors based on behavioral science to make investment decisions. This method is based on the strict assumption that the classical financial theory is contrary to the real market, such as the market is frictionless and investors are completely rational. However, in the securities market, not every investor will use the complicated mathematical methods in investment theory to deduce the so-called rational equilibrium price to guide his investment behavior. Investors don't always make investment decisions based on fundamentals, sometimes they make decisions based on noise and become so-called noise traders. The advantage of behavioral financial analysis method is that it can ensure investors to observe correctly in the process of securities investment, especially in the psychological analysis of major turning points in the market, which often has good results; The disadvantage is that this method is based on people's different rational behaviors and psychological assumptions, and it is difficult to get a unified conclusion to guide investors' behavior.
In short, the use of the above four analytical methods is conditional, and each has its own advantages and disadvantages. In order to obtain stable returns in the securities market, it is not enough to rely on an analytical method to guide investment decisions, and even to take great risks, it is necessary to combine the above methods. It is believed that with the continuous development of the securities market, investors will become more and more mature and have stronger insight into the market, and then they will skillfully use various analysis methods to gain more benefits with the least loss.