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Unit 7: Fundamental Analysis 1: Economic Analysis

Government purchases of goods and services Notes
Net exports
Forecasting the individual components of GNP, the analysis then adds them up to obtain
a figure of the GNP.
The analyst compares the total of GNP and arrives at an independent estimate appropriately.
The forecast of GNP is an overall forecast for internal consistency. This is done to ensure
that both his total forecast and permanent forecast make sense and fit together in a
reasonable manner.

Thus the GNP model building involves all the details described above with a considerable
amount of judgment.

What has accounted for this suddenly revived economy? One likely answer is definitely a
cut in customs and a corresponding reduction in excise, which has helped reduce the cost
structure of a number of products. This has made a number of products cheaper in the
domestic market and expanded the demand for them in the process.

Caselet How Different are Fundamental and Technical
Analysis?

e should note here, before going on with our discussion of the various aspects
of the two analytical schools, that while the explanations of the fundamental
Wand technical analyst on a phenomenon may differ from each other, the end
result, and the trade recommendation can in many cases be the same.
To give an example of this, we may examine the classical case of a parabolic price graphic
which would make both kinds of analysts cautious, but for different reasons. The technical
analyst would look at his charts, notice the extreme values registered on the indicators,
and would caution against joining a trend that is in danger of suffering a sharp reversal as
the inevitable countertrend movement occurs. The fundamental analyst would look at the
euphoria in news sources and analyst community, consider the declarations of government
authorities and important personages, and would probably give the same warning. While
the tools and indicators used by these two individuals are different, their actions often
coincide with each other.
Fundamental and technical analysis is not exactly the same thing, and at least in the longer
term, the predictive power of fundamental studies is almost certainly greater. Nonetheless,
these two are akin to two different languages describing the same phenomenon, and at
least on hindsight, they always show the same direction, and reach the same conclusions.

Source: http://www.forexfraud.com/learn-forex-trading/fundamental-analysis-vs-technical-
analysis.html

7.2.8 Economy and Industry Analysis

Investment decisions are a part of our economic life, made by almost everybody in different
contexts at different times. The highly subjective nature of such decisions and the varying results
that they offer therefore, necessitate a further study and analysis into the same.

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