Fundamental and Technical Analysis: Substitutes or Compliments?

28 Pages Posted: 2 May 2006

See all articles by Jenni L. Bettman

Jenni L. Bettman

Australian National University (ANU)

Stephen Sault

Australian National University (ANU); Financial Research Network (FIRN)

Emma Welch

Australian National University (ANU) - Faculty of Economics & Commerce

Date Written: March 28, 2006

Abstract

While the fundamental and technical analysis literatures invest considerable effort in assessing their respective ability to explain share prices, they invariably do so without reference to each other. In this context, we propose an equity valuation model integrating both fundamental and technical analysis and, in doing so, recognize their potential as complements rather than as substitutes. Testing confirms the complementary nature of fundamental and technical analysis by showing that, while each performs well in isolation, models integrating both have superior explanatory power. While our findings relate to the valuation of shares, they also have implications for other valuation exercises.

Keywords: Equity valuation models, Fundamental information, Technical information

JEL Classification: G12, G14, M41

Suggested Citation

Bettman, Jenni L. and Sault, Stephen and Welch, Emma, Fundamental and Technical Analysis: Substitutes or Compliments? (March 28, 2006). Available at SSRN: https://ssrn.com/abstract=899879 or http://dx.doi.org/10.2139/ssrn.899879

Jenni L. Bettman (Contact Author)

Australian National University (ANU) ( email )

Canberra, Australian Capital Territory 2601
Australia

Stephen Sault

Australian National University (ANU) ( email )

Canberra ACT 0200, 2601
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Emma Welch

Australian National University (ANU) - Faculty of Economics & Commerce ( email )

Canberra, Australian Capital Territory 2601
Australia

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