I personally do not believe pairing bond ratings with additional services is acceptable due to the fact that bonds are meant to be rated at the time of issue. Furthermore, the bonds and the issuers undergo periodic reevaluation to check if any alterations in the ratings are warranted. As such, bond ratings are essential not only for their informal role to investors, but also due to the fact that they affect interest rates that both government agencies and corporations pay on their issued bonds.

By definition, the investment theory known as the efficient market hypothesis states that one cannot possibly defeat the market due to the fact that efficiency forces existing share price figures to always reflect and incorporate relevant information. Accounting is a process that companies utilize to report, record, and analyze financial data. Capital Asset Pricing Models are utilized for pricing the riskiest securities, calculating capital costs, and generated expected returns given the risk. This has proven to compensate investors in time value of money. Fundamental analysis will show that all companies who report good earnings see a rush of longs pushing their share price sky high. However, finding out that much of their performance was achieved via fraudulent gimmicks would instigate short sellers to push the stock down.

To recoup the costs associated with acquiring insider information with respect to both the quantitative and non-quantitative factors that represent defaults, a growing number of bond rating agencies will tie the purchase of additional services to their ratings. I personally do not believe such a business practice is acceptable due to the fact that bonds are meant to be rated at the time of issue. Furthermore, the bonds and the issuers undergo periodic reevaluation to check if any alterations in the ratings are warranted. As such, bond ratings are essential not only for their informal role to investors, but also due to the fact that they affect interest rates that both government agencies and corporations pay on their issued bonds.

Significant costs must be paid by the raters and because of this they require a financial incentive to analyze the bond and generate profits. I stand by the notion that credit agencies should have no links to the company and remain impartial. Despite the fact that every credit analyst will offer a mildly different evaluation approach to the worthiness of a company, bonds must be compared to determine whether they are worth investment or not. Over time, bond ratings affect marketability in the secondary market, corporations’ abilities to borrow, the power issue stock, psychological impact on how a given company is viewed, etc. Therefore, it is critical for both the point of view of the investor and the company to be clear of any artificial promotion or additional services.

By definition, the investment theory known as the efficient market hypothesis states that one cannot possibly defeat the market due to the fact that efficiency forces existing share price figures to always reflect and incorporate relevant information. Therefore, stocks will always trade at fair value on the various exchanges which makes it impossible for an investor to sell a stock at an inflated price or purchase undervalued shares. Consequently, no one could singlehandedly outperform the game through timing or expert selection. To solve this problem, it has been theorized the only way to generate higher returns is to take bigger risks. According to this definition, the equity market is inefficient. However, many traders have designed strategies to minimize risk and acquire rapid rates of return utilizing a combination of technical and fundamental analysis.

Accounting is a process that companies utilize to report, record, and analyze financial data. Facts are information commonly used by stakeholders who make investment decisions based on the information. Companies will often issue income statements, cash flow statements, and balance sheets which outline cost of goods, assets, revenue, expenses, and liabilities. The importance of these features with respect to efficient market theory include net income, economic value, and gross profit. Functionality of accounting allows economists and investors to break the data down to its lowest efficiency form based on the company’s financial operations. Various competitors can also utilize this data to price their own goods and services. Investment of time and money is crucial to defeating the market, yet spending precious energy obsessing over financial statements will not help much compared to analyzing chart patterns and other technical data such as volume. Despite this, timing of entry and exit for positions is very important to minimize risk and maximize profit.

Capital Asset Pricing Models are utilized for pricing the riskiest securities, calculating capital costs, and generated expected returns given the risk. This has proven to compensate investors in time value of money. For example, General Electric has had a turbulent history with meeting and beating their earnings forecasts. Fundamental analysis will show that all companies who report good earnings see a rush of longs pushing their share price sky high. However, finding out that much of their performance was achieved via fraudulent gimmicks would instigate short sellers to push the stock down. If I had $10,000, I would be shorting all of the companies who use fraudulent measures to achieve their goals as the price inevitably drops due to such patterns.