Security analysis is the analysis of tradeable
financial instruments called
securities. It deals with finding the proper value of individual securities (i.e., stocks and bonds). These are usually classified into debt securities,
equities
In finance, stock (also capital stock) consists of all the shares by which ownership of a corporation or company is divided.Longman Business English Dictionary: "stock - ''especially AmE'' one of the shares into which ownership of a company ...
, or some hybrid of the two. Tradeable
credit derivative
In finance, a credit derivative refers to any one of "various instruments and techniques designed to separate and then transfer the ''credit risk''"The Economist ''Passing on the risks'' 2 November 1996 or the risk of an event of default of a corp ...
s are also securities. Commodities or
futures contract
In finance, a futures contract (sometimes called a futures) is a standardized legal contract to buy or sell something at a predetermined price for delivery at a specified time in the future, between parties not yet known to each other. The asset ...
s are not securities. They are distinguished from securities by the fact that their performance is not dependent on the management or activities of an outside or third party. Options on these contracts are however considered securities, since performance is now dependent on the activities of a third party. The definition of what is and what is not a security comes directly from the language of a United States Supreme Court decision in the case of
SEC v. W. J. Howey Co.
''Securities and Exchange Commission v. W. J. Howey Co.'', 328 U.S. 293 (1946), was a case in which the Supreme Court of the United States held that the offer of a land sales and service contract was an "investment contract" within the meaning of ...
Security analysis for the purpose to state the effective value of an enterprise is typically based on the examination of fundamental business factors such as
financial statements, going concern, business strategy and forecasts.
See also
*
Financial analyst
A financial analyst is a professional, undertaking financial analysis for external or internal clients as a core feature of the job.
The role may specifically be titled securities analyst, research analyst, equity analyst, investment analyst, ...
*
Stock valuation
In financial markets, stock valuation is the method of calculating theoretical values of companies and their stocks. The main use of these methods is to predict future market prices, or more generally, potential market prices, and thus to profit fr ...
*
Securities research
Securities research is a discipline within the financial services industry. Securities research professionals are known most generally as "analysts", "research analysts", or "securities analysts"; all the foregoing terms are synonymous. Researc ...
References
{{DEFAULTSORT:Security Analysis
Financial markets