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Investing for Organizational Sustainability

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wall street survivor • investing 101<br />

9. What is a MACD?<br />

c. A graph that shows the difference between the fast- or slowmoving<br />

averages of a stock’s price.<br />

While it may seem very confusing, this acronym <strong>for</strong> Moving Average<br />

Convergence/Divergence is a graph that even a modest investor can use to<br />

identify significant trend changes in stock prices. Using the MACD indicator<br />

may even help you track the price path of a stock just like the big<br />

investors.<br />

10. What is the objective of Bollinger Bands?<br />

c. Identify a relative definition of high and low stock prices over a<br />

certain time period.<br />

This technical analysis tool measures the highs and lows of a stock price<br />

relative to previous trade data, providing a trading band where investors<br />

can identify the bandwidth of highs and lows of a particular stock. These<br />

trends can also help pinpoint and measure the volatility of a stock that<br />

will help determine your investment decision about a particular stock.<br />

Chapter 8 Quiz<br />

1. What defines an investment bubble?<br />

a. Prices go up too much, too fast and back down too quickly.<br />

Investment bubbles always implode and are characterized by certain<br />

non-sustainable price changes or cash flow patterns. During these<br />

periods, prices increase quickly and eventually drop suddenly. Examples<br />

include the Japanese stock market bubble of the 1980s and the dot.com<br />

Internet stock bubble of the late 1990s.<br />

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