Therefore the variables are achieving positive correlation CONCLUSION The above

Therefore the variables are achieving positive

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Therefore, the variables are achieving positive correlation. CONCLUSION The above analysis has investigated the relationship between financial statement information and stock returns. The score is based on set of accounting information as formulated by Piotroski (2000). This is considered as a composite score which combines information related to Profitability, Liquidity and Operating efficiency of any given firm. One striking observation is that, taken on an average, market adjusted returns are monotonously increasing with the score in the contemporaneous accounting period. This is in consistent with the view that markets are rapidly integrating information into stock prices. Finally it is concluded that all individual accounting signals have a positive correlation with future stock returns and for most of the signals, correlation is significant at 1% and 5% significance levels. This necessitates identifying those individual signals contributing in defining successful fundamental strategies. The positive correlation between aggregate fundamental signals and high score firms identifies it as a winner portfolio having a earning realization of close to 300%. REFERENCES Ababanell JS, Bushee BJ (1997). Fundamental Analysis, Future Earnings, and Stock Prices, Journal of Accounting Research, 35(1), 1-24. Datar VT, Naik NY, Radcliffe R (1998). Liquidity and stock returns: An alternative test, Journal of Financial Markets, 1 (2), 203-219. Fama E, Frenck K (1992). The cross section of expected returns, Journal of Finance, 47:427-465. Fama EF, French KR (1992). The Cross Section of Expected Returns, Journal of Finance, 47 (2), 427-465. Gordon MJ (1962). “The Investment, Financing and Valuation of the Corporation” Irwin, Homewood Illinois. Graham B, Dodd D (1996). Security Analysis: The Classic 1934 Edition, McGraw-Hill, New York, NY. Jaouida E (2009). Fundamental Analysis Strategy and the Prediction of Stock Returns, International Research Journal of Finance and Economics, Issue 30, page 95-108. ( Faculty of Economics and Management Sciences, University of Sfax, Tunisia) Jegadeesh N, Titman S (1993). Returns to buying winners and selling losers: Implications for stock market efficiency, Journal of Finance 48: 65-91. Lev B, Thiagarajan R (1993). Fundamental information analysis, Journal of Accounting research 31:190-215 Ou J, Penman S (1989). Financial statement analysis and Prediction of stock returns, Journal of Accounting and Economics 11:295-329. Piotroski J (2000). Value investing: The use of Historical financial statement information to separate winners from losers, Journal of Accounting Research. Sloan R (1996). “Do stock prices fully reflect information in accruals and cash flows about future earnings”, The Accounting Review , 71:289- 315.
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  • Balance Sheet, Generally Accepted Accounting Principles, CFO, AROA

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