A Financial Profile of Firms Awarded the Highest Technical Ratings by Value Line in a Period of High Economic Growth
Keywords:Technical Analysis, Economic Growth, Multiple Discriminant Analysis.
This study examines the financial characteristics of the group of firms that have been identified by Value Line as having the highest technical ratings in their database during the four years preceding the 2020 occurrence and resulting economic downturn of the coronavirus-19 pandemic. That period was characterized by a high level of economic growth, low unemployment, and record-high equity markets. Those highest-ranking firms are compared with firms chosen at random, but from the same industries, to determine whether the firms with the high technical ratings in such an economic environment have a unique risk-return profile, and by implication a heretofore unknown relationship between technical and fundamental analysis. As in previous studies of this type, multiple discriminant analysis is used to identify the characteristics that most highly separate the two groups of firms, and canonical correlation ranks the discriminant variables.
Keywords: Technical Analysis, Economic Growth, Multiple Discriminant Analysis.
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