An empirical review of the complimentary nature of fundamental and technical analysis techniques based on JSE-listed stocks
Date
2014-07-15
Authors
Mashiqa, Vuyolwethu Ayanda
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Abstract
This study contributes to the debate on whether fundamental analysis and technical analysis
techniques can be used jointly in making investment decisions. Extant literature on
fundamental and technical analysis techniques has frequently focused on analysing each of
the valuation techniques independently of one another. In this study we construct a model
that integrates both fundamental and technical analysis variables (hybrid model) to
determine whether the hybrid model can have a superior explanatory power to models
based on each of the valuation techniques in isolation. This study is based on all ordinary
shares that have been listed on the JSE main board between the 2002 and 2012 fiscal years.
Testing rejects the complimentary nature of fundamental and technical analysis techniques
by showing that the technical analysis model has a superior explanatory power to both the
hybrid model and the fundamental analysis model. We also demonstrate that JSE-listed
stocks do not exhibit momentum or contrarian effects with respect to return performances
and that the fundamental analysis variables that play a significant role in explaining stock
price movements of JSE-listed stocks are the book value per share, cash flow per share,
earnings per share and dividends per share.
Description
Keywords
Fundamental analysis, Technical analysis, Integration of fundamental and technical analysis