Two ways to try to beat the stock market:

1. Market timing – When prices are rising and falling; get in and out of the stock market to buy low and sell high.

    Problem – Very difficult to know if stock prices are going up or down.

    Caveat - To recover costs of marking timing (being out of the market at the wrong time) you need to be correct in your timing about three quarters of the time.

2. Fundamental analysis – buying only the best stocks (through selection techniques)

    Problem, everyone else is already doing this.

    If you find one of these, it won’t stay undervalued for long.

Types:

Weak market– past history of company is of no use towards future stock price.  (No rear view mirror investing)

Semi strong market– all public information is already reflected in stock

Strong market– all public and all non-public information is already reflected in stock price

            Weak = true   semi = maybe   strong = not true

Efficient market - prices quickly adjust to what is going on because of the speed information hits the market.

    This means that if it is a 100% efficient market, it would be impossible to beat the market.

If things are not priced efficiently, temporary arbitrage will exist.

Stock Markets:

Trading for NYSE listed stocks:
    New York
    NASD
    Chicago
    Pacific
    Boston
    Cincinnati
    Philidelphia
    CBOE