A fundamental analyst:
A) relies on the same information as the technical analyst, but believes in the random walk.
B) studies a firm's financial statements to determine pricing inefficiencies.
C) believes that the market is strong-form efficient.
D)performs an unnecessary function, since markets are efficient.

Question

Quizplus · Accepted Answer

A fundamental analyst studies a firm's financial statements, industry trends, and other qualitative and quantitative factors to determine whether the stock is overvalued or undervalued. They believe that pricing inefficiencies exist in the market that can be exploited through their analysis. This is different from technical analysts who focus on patterns in price and volume data to predict future price movements. Fundamental analysts do not believe in the random walk theory or that markets are strong-form efficient.

A Fundamental Analyst