Journal of Applied Finance & Banking, vol.1, no.3, 2011, 125-138
ISSN: 1792-6580 (print version), 1792-6599 (online)
International Scientific Press, 2011

Stock Market Analysis in Practice:
Is It Technical or Fundamental?
Gil Cohen1, Andrey Kudryavtsev2 and Shlomit Hon-Snir3

Abstract
Investors use varies tools in the investment process. Some use technical or fundamental analysis, or both in that process. The aim of the following survey research is first, to examine differences between professional portfolio managers to amateur investors in their approach towards technical and fundamental analysis.
Second, we want to study the difference of use of fundamental and technical tools in the buying versus selling stocks. We used online survey in one of the leading business portals in addition to asking professional investors in a leading investment house in Israel. Our results show no significant difference between professional and non-professional investors in terms of how frequently they use fundamental and technical investment tools. Both groups of investors use more frequently fundamental tools than technical when they make buy/sell decisions.
We also found that non-professional investors use more fundamental tools such as
"analysts' recommendations" when they buy stocks and more technical tools such as "support and resistance lines" when they sell stocks. Moreover, our study Economics and Management Department, The Max Stern Academic College of Emek
Yezreel, Emek Yezreel 19300, Israel, e-mail: gilc@yvc.ac.il
2
Economics and Management Department, The Max Stern Academic College of Emek
Yezreel, Emek Yezreel 19300, Israel, e-mail: Kudryavtsev: andreyk@yvc.ac.il
3
Economics and Management Department, The Max Stern Academic College of Emek
Yezreel, Emek Yezreel 19300, Israel, e-mail: shlomith@yvc.ac.il.
1

Article Info: Revised : October 25, 2011. Published online : November 30, 2011

126 Stock Market Analysis in Practice …

indicates that investors use financial statements and support and resistance lines together as a primary tool for their investment behavior. This result breaks a common hypothesis arguing that fundamental and technical tools do not mix.

JEL classification numbers: G11, G14, G19.
Keywords: Decisions to Buy and Sell Stocks; Fundamental Analysis;
Professional and Non-Professional Investors; Technical Analysis.

1 Introduction
Fundamental and technical analyses are known for many years as leading investment decisions tools. However, to the best of our knowledge, no past research examined to what extent those tools are used from dual point of view: professional versus non-professional investors, and buying versus selling of stocks. The questions raised in our current research are: 1. Are professional portfolio managers different from non-professional investors in their use of well known investment tools and 2. Do investors behave differently when they buy and sell stocks. We expect to find a more extensive use of well known investment tools by professional relatively to non-professional investors. With regard to question 2, the prediction is quite puzzling. We argue that an investor is more objective when he buys a stock than when he sells it because of the endowment effect that was first mentioned by Daniel Kahneman, Jack Knetsch and Richard
Thaler [6]. Therefore, we expect a more extensive use of known objective tools in the buying process and less in the selling. Another interesting aspect of our research is to examine whether the investor's self characteristics such as age, gender and capital markets experience influence the intensity of using the investment tools.

Gil Cohen, Andrey Kudryavtsev and Shlomit Hon-Snir

127

2 Literature Review
For many years investors used various tools to support their buying and selling stocks decisions. Two sets of tools are