Canadian Securities Course CSC2 Updated Exam

Both technical analysis and fundamental analysis are tools used to predict changes in security prices, but they differ significantly in their approaches.

Fundamental Analysis evaluates the intrinsic value of a security by analyzing factors such as a company’s financial statements, industry conditions, and macroeconomic trends. It assumes that market prices will eventually reflect a security’s true value.

Technical Analysis examines historical price and volume data to predict future price movements. It focuses on identifying patterns, trends, and market sentiment without regard to the underlying fundamentals.

Option A is incorrect because it only describes fundamental analysis. Option B erroneously connects both methodologies to the random walk theory, which discounts their effectiveness. Option D misstates their purpose, as technical analysis focuses on price trends, not the causes of price movements.