Article 5.pdf - Global Advanced Research Journal of Economics Accounting and Finance Vol 1(2 pp 033-039 December 2012 Available online

Article 5.pdf - Global Advanced Research Journal of...

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Global Advanced Research Journal of Economics, Accounting and Finance Vol. 1(2) pp. 033-039, December, 2012 Available online Copyright © 2012 Global Advanced Research Journals Full Length Research Paper Fundamental analysis and stock returns: An Indian evidence Venkates CK 1 *, Dr.Madhu Tyagi 2 , Dr.Ganesh L 3 1 (Research Scholar, IGNOU, Maidan Ghari, New Delhi) Assistant Professor, GFGC, Kadugudi, Bangalore-560 067 2 Professor, School of management, IGNOU, Maidan Ghari, New Delhi 3 Professor, Institute of Management, Christ University, Hosur Road, Bangalore-560 030. Abstract This paper investigates the relationship between accounting information and stock returns of selected Indian stocks pertaining to Information Technology, Banking and Pharmacy sectors over the past ten years starting from 2001 to 2010. In this research work a simple financial score is designed to capture short term changes in firm’s operating efficiency, Profitability and Financial policy. Investigating accounting information and stock returns is a method adopted in Fundamental analysis, which is helpful in predicting future stock returns and for explaining the momentum phenomenon in stock prices. For the purpose of this research work were chosen from Banking, Pharmacy and Information Technology. For a period of ten years the data pertaining to operating efficiency, profitability and financial policy was ascertained. All this data is then put into F SCORE as developed by Piotroski in the year 2000. The score values and market returns as provided by the companies were correlated to investigate the relationship between the score and the market adjusted returns. The goal of this paper is to show that investors can create a stronger value portfolio by using simple historical financial performance. Keywords: Fundamental analysis, Financial Statements, Return on assets, Book to market ratio, INTRODUCTION The mobility and usage of assets determine the Economic development of a nation. Conducive Economic environment attracts investments, which in turn influences the development of the Economy. One of the essential criteria for the assessment of the Economic development is the quality and quantity of assets in a nation at a specific time. Real assets comprise the Physical and Intangible items available to a society. *Corresponding Author’s E-mail: [email protected] Physical assets are used to generate activity and result in positive or negative contribution to the owner of the asset. Intangible assets also result in a positive or negative contribution to the owner, but are different in that they do not have a physical shape or form. In fact, intangible assets help physical assets in generating activity. Intangible assets can be said to be behind the scene with respect to productive activities. Besides real assets, the Economy is supported by another group of assets called Financial Assets. The major component of the Financial Assets is cash, also some other examples of financial assets are Deposits, Debt Instruments,
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Glo. Adv. Res. J. Econ. Account. Finance. 034
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