Four Approaches to Information Technology Infrastructure Investment

FOUR APPROACHES TO information technology floor investing Presented by Kemeasoudei Fanama (u0856287) WHAT IS knowledge TECHNOLOGY? Information technology is outlined as the study, design, development, implementation, support or instruction of information processing system- based information systems, particularly parcel applications and computer hardw be. IT deals with the use of electronic computers and computer software to convert, store, transmit, process, protect and securely recuperate information. APPROACHES TO INFORMATION TECHNOLOGY INFRASTRUCTURE enthronization 1. unplumbed Approach The base tenets of the fundamental ascend, which is peradventure most commonly advocated by investiture professionals, are as follows There is an ingrained cherish of a security and this depends upon cardinal economic (fundamental) factors. The intrinsic value foot be established by a penetrating synopsis of the fundamental factors relating to the company, industry, and economy. A t any given point of time, thither are around securities for which the preponderating grocery scathe would differ from the intrinsic value.Sooner or later, of course, the commercialise place determine would run in line with the intrinsic value. ? ? ? Superior returns wad be earned by purchasing under-valued securities (securities whose intrinsic value exceeds the market expense) and selling over-valued securities (securities whose intrinsic value is less than the market price). APPROACHES TO INFORMATION TECHNOLOGY INFRASTRUCTURE INVESTMENT (continued) 2. Psychological Approach The mental approach is based on the premise that gunstock prices are guided by emotion, alternatively than reason. communication channel prices are believed to be influenced by the psychological mood of the investors. When greed and euphoria drop the market, prices rise to dizzy heights. On the otherwise hand, when fear and despair envelop the market, prices fall to abysmally low levels. Since psychic determine appear to be more chief(prenominal) than intrinsic values, the psychological approach suggests that it is more profitable to analyse how investors tend to exile as the market is swept by waves of optimism and pessimism which seem to alternate. The psychological approach has been describe vividly as the castles-in-air theory by Burton G.Malkiel. Those who subscribe to the psychological approach or the castles-in-the-air theory generally use some form of skilful summary which is touch on with a study of internal market data, with a view to developing business rules aimed at profit-making. The basic premise of proficient foul depth psychology is that on that point are reliable persistent and recurring patterns of price movements, which lowlife be discerned by analysing market data. skilful analysts use a variety of tools handle bar chart, point and figure chart, despicable average analysis, breadth of market analysis, etc.APPROACHES TO INFORMATION TECHN OLOGY INFRASTRUCTURE INVESTMENT (continued) 3. pedantic Approach Over the last 5 decades or so, the academic community has study various aspects of the seat of government market, particularly in the advanced countries, with the help of plumb civilize methods of investigation. While there are some a(prenominal) unresolved issues and controversies stemming from studies pointing in different directions, there appears to be substantial support for the pursuance tenets. Stock markets are reasonably expeditious in reacting quickly and rationally to the lean of information.Hence, stock prices reflect intrinsic value fairly well. Put differently commercialise price = Intrinsic value Stock price behaviour corresponds to a hit-or-miss walk. This path that successive price changes are independent. As a result, past price behaviour cannot be used to look to future price behaviour. In the capital market, there is a positive kinship between attemptiness and return. More specific ally, the anticipate return from a security is linearly related to its taxonomic risk. Stock price behaviour corresponds to a random walk. This means that successive price changes are independent.As a result, past price behaviour cannot be used to predict future price behaviour. In the capital market, there is a positive relationship between risk and return. More specifically, the expected return from a security is linearly related to its systematic risk APPROACHES TO INFORMATION TECHNOLOGY INFRASTRUCTURE INVESTMENT (continued) 4. ? Eclectic Approach The discriminating approach draws on all the troika different approaches discussed above. The basic premises of the eclectic approach are as follows Fundamental analysis is helpful in establishing basic standards and benchmarks.However, since there are uncertainties associated with fundamental analysis, exclusive reliance on fundamental analysis should be avoided. Equally important, excessive glossiness and complexity in fundament al analysis must be viewed with caution. ? Technical analysis is useful in broadly gauging the prevailing mood of investors and the relative strengths of supply and indigence forces. However, since the mood of investors can vary unpredictably excessive reliance on technical indicators can be hazardous.More important, complicated technical systems should ordinarily be regarded as wary because they often represent figments of imagination alternatively than tools of proven usefulness. The market is neither as well ordered as the academic approach suggests, nor as speculative as the psychological approach indicates. While it is characterised by some inefficiencies and imperfections, it seems to react reasonably expeditiously and rationally to the flow of information. Likewise, despite many instances of mispriced securities, there appears to be a fairly strong correlation between risk and return. ? THANK YOU