# Is the fundamental analysis also a self-fulfilling prophecy?

John J. Murphy in the first chapter of his book "TECHNICAL ANALYSIS OF FINANCIAL MARKETS" says that concerns regarding fundamental analysis being a self-fulfilling prophecy are seldomly raised, as opposed to technical analysis which receives criticism in the form of getting labelled as a self-fulfilling prophecy. So is the fundamental analysis, at-least in a few ways, a self-fulfilling prophecy?

• Market efficiency suggests that either methodology isn't particularly useful and there seems to be consensus (among academics) that the US stock market is pretty informationally efficient.
– Alex
Mar 14 at 16:49
• @Alex what if the market is only efficient because of people doing technical analysis? Market efficiency is an outcome, not an axiom. Mar 15 at 12:11
• @1muflon1 I've marked this as "nonexpert" since books are generally not peer-reviewed. I don't think this meets the standard in any other criteria. Mar 15 at 20:36
• @jmbejara ok I wont fight you on this in this case but I think textbooks/handbooks should generally count as academic literature. I don't know enough about this author, and the question is entry level, but I think it would be mistake to apply the label to lets say Q based on Woodford Insterest and Prices. I definitely do not want to discourage use of the tag but also lets not be too overzealous either.
– 1muflon1
Mar 15 at 20:45
• @1muflon1 The benefit of using Woodford's book is that either the question will be about a mathematically precise economic/econometric model or the text of the book will be, itself, referencing a peer-reviewed article. Makes it easy to transform a Q from his book into one that meets the criteria. (E.g., can provide a citation to the underlying peer-reviewed article referenced in the textbook.) Mar 15 at 21:04

• I agree with your second sentence (increased earnings $\to$ increased stock price). But I disagree with the third sentence. After the earnings increase, the stock price will increase instantly (or maybe after one share has been traded); you don't need lots of people investing in the stock. Mar 17 at 2:31