Does Fundamental and Technical Analysis Reduce Investment Risk for Growth Stock? An Analysis of Taiwan Stock Market

  •  Yun-Chin Wang    
  •  Jean Yu    
  •  Shiow-Ying Wen    


In this paper, we implement methodology to empirically identify how individual trader can make profits by applying combined strategies of identifying fundamental and technical risk management. Our data is from Taiwan Economic Journal Database (TEJ), and covering information from 1991 to 2009. Proper risk management skills employed increase the momentum portfolio returns. We explore investment opportunity by examining firm level of financial factors, including profitability, operating efficiency, accounting conservatism and solvency. When investors obtain quotations and identify potential stocks, volume data of the key attributes of stocks usually goes overlooked as price-to-earnings ratio, market size, or even ex-dividend date even comes in priority. In order to justify the optimal timing of investment, we use the covariance between price and volume as a buying signal to filter portfolios for technical analysis. Result confirms selected portfolios earn significant excess returns which beat the market with long term holding period.

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