Contents

Various research methodologies ............................................................................................................ 2 Deductive Research Methodology ...................................................................................................... 2 Inductive Research Methodology ....................................................................................................... 2 Pragmatic Research methodology ...................................................................................................... 3 Human information processing research ............................................................................................... 3 Sources of Accounting Information required to make a sound investment decision ............................ 4 Fundamental analysis ................................................................................................................. 4

Technical analysis................................................................................................................................ 5 Evaluation of the above sources of information .................................................................................... 5

Various research methodologies

A research methodolgy is an intellectual human activity which is used to investigate the nature and the matter and which deals with the manner in which the data is collected, processed and analyzed. Selection of Methodology: Nature of the problem being investigated Problem being investigated is subjecgtive or objective Types of research methods o Deductive o Inductive o Pragmatic

Deductive Research Methodology

Deductive reasoning works from being general to coming down on a specific result. This is also called as Top Down Approach. Conclusion follows directly from the available facts. We might begin with thinking up a theory about our topic of interest. We then narrow that down into more specific hypotheses that we can test.

Inductive Research Methodology

Inductive reasoning works the other way. One moves from specific observations to a generalized conclusion. This approach is also called as Bottom Up approach. Conclusion is likely to be based upon the underlining facts. It involves too much subjectivity.

Pragmatic Research methodology

It is a method that tries to fit together a model for the insights provided by the inductive and deductive research and come out with a workable solution. Along these lines pragmatism is a way for researchers to think about the traditional dualisms that have been debated by the purists. Taking a pragmatic and balanced or pluralist position will help improve communication among researchers from different paradigms as they attempt to advance knowledge (Maxcy, 2003; Watson, 1990). Pragmatism also helps to shed light on how research approaches can be mixed fruitfully (Hoshmand, 2003); the bottom line is that research approaches should be mixed in ways that offer the best opportunities for answering important research questions.

Human information processing research

The Human Information Processing Research Branch is part of the Human Factors Division at NASA Ames Research Center. The Human Factors Division is subdivided in three research branches. Under the various branches are research groups. The Human Information Processing Research Branch (Code IHH) has five such groups.

. It is a model of information processing that takes into account recent research on memory storage, selective attention, effortful versus automatic processing, and the mutual constraints that these areas place on one another. One distinctive aspect of the proposed model is the inclusion of two phases of sensory storage in each modality. The first phase extends sensation of several hundred milliseconds, whereas the second phase is a vivid recollection of sensation. The mechanism of at least the longer phase is the activation of features in longterm memory, comparable to the mechanism of non-sensory, short-term storage. Another distinctive aspect of the model is that habituation/dishabituation and central executive

processes together are assumed to determine the focus of attention, without the need for either an early or a late attentional filter. Along with the recognition that decision making is the focal point of the current practice of accounting, an extensive body of research which analyses decision making in accounting settings has been developed. This research is usually referred to as human information processing (HIP) or behavioural decision making research. Accountants have shown particular interest in studies which investigate (1) the role of accounting information in user decisions (e.g. in commercial lending) and (2) the complex decisions required in the practice of accounting (e.g. in auditing). The evidence generated by this research serves a dual purpose. First, it may lead to improvements in these accounting decisions. Second, it can add to the basic knowledge of human decision processes. Accountant's interest in decision making is resulting in a growing body of research based upon theories and models from the psychology of information processing. It presents a classification of information processing variables which have been studied by psychologists which serves as a framework for organizing information processing research in accounting. It also reviews and evaluates the existing accounting literature based upon three research approaches: the lens model, probabilistic judgment, and cognitive style.

Sources of Accounting Information required to make a sound investment decision

The following are the sources of information that are required to make a decision to buy, hold or sell a security: Balance Sheet Profit & Loss Statement (P&L) Management Discussion & Analysis report (MD&A) Price Volume data of the stock

Using the above sources of data we can perform

Fundamental analysis: Used Balance Sheet, P&L statements, MD&A

o Fundamental stock analysis requires, among other things, a close examination of the financial statements for the company to determine its current financial strength, future growth and profitability prospects, and current management skills, in order to estimate whether the stock's price is undervalued or overvalued. A good deal of reliance is placed on annual and quarterly earnings reports, the economic, political and competitive environment facing the company, as well as any current news items or rumors relating to the company's operations. Simply put, fundamental analysis concerns itself with the "basics" of the business in assessing the worth of a stock.

o Numerous ratios, derived from balance sheet and income statement data, are used in fundamental analysis including such widely used ratios as, Working Capital Ratio, Debt-equity Ratio, Return on Equity Ratio, Earnings per Share, etc.

Technical analysis
o Technical analysis does not concern itself with a company's basics or fundamentals. Rather, technical analysis involves the study of a stock's trading patterns through the use of charts, trend lines, support and resistance levels, and many other mathematical analysis tools, in order to predict future movements in a stock's price, and to help identify trading opportunities. o The basic foundations or premises of technical analysis are that a stock's current price discounts all information available in the market, that price movements are not random, and that patterns in price movements, in very many cases, tend to repeat themselves or trend in some direction.

Evaluation of the above sources of information

There is no specific order to determine the importance of the information sources. But the relevance of the information is dependent upon the risk appetite and the investment horizon of the investor. For instance, fundamental analysis is a suitable method to use for mid term and long term investment strategy. Trend analysis is useful for intraday trader or an investor who wants to invest for a very short term.

References:
http://www.ehow.com/info_8060156_stock-holders-accounting-information.html http://deepblue.lib.umich.edu/handle/2027.42/24105 http://econpapers.repec.org/article/eeeaosoci/v_3a7_3ay_3a1982_3ai_3a3_3ap_3a231-285.htm http://www.londonmet.ac.uk/library/a16678_3.pdf http://www.socialresearchmethods.net/kb/dedind.php http://www.wikipedia.org/