Editing Fundamental analysis (section)

==The two analytical models==
There are two basic methodologies investors rely upon when the objective of the analysis is to determine what stock to buy and at what price:

#Fundamental analysis. Analysts maintain that markets may incorrectly price a security in the short run but the "correct" price will eventually be reached. [[Profit (accounting)|Profits]] can be made by purchasing or selling the wrongly priced security and then waiting for the market to recognize its "mistake" and reprice the security.
#[[Technical analysis]]. Analysts look at trends and price levels and believe that trend changes confirm sentiment changes. Recognizable price chart patterns may be found due to investors' emotional responses to price movements. Technical analysts mainly evaluate historical trends and ranges to predict future price movement.<ref>{{cite book|last1=Murphy|first1=John J.|title=Technical analysis of the financial markets : a comprehensive guide to trading methods and applications|date=1999|publisher=[[New York Institute of Finance]]|location=New York [u.a.]|isbn=0735200661|edition=2nd}}</ref>

Investors can use one or both of these complementary methods for stock picking. For example, many fundamental investors use technical indicators for deciding entry and exit points. Similarly, a large proportion of technical investors use fundamental indicators to limit their pool of possible stocks to "good" companies.

The choice of stock analysis is determined by the investor's belief in the different paradigms for "how the stock market works". For explanations of these paradigms, see the discussions at [[efficient-market hypothesis]], [[random walk hypothesis]], [[capital asset pricing model]], [[Fed model]], [[market-based valuation]], and [[behavioral finance]].

Fundamental analysis includes:
#Economic analysis
#Industry analysis
#Company analysis

The intrinsic value of the shares is determined based upon these three analyses. It is this value that is considered the true value of the share. If the intrinsic value is higher than the market price,  buying the share is recommended. If it is equal to market price, it is recommended to hold the share; and if it is less than the market price, then one should sell the shares.