Understanding the Relationship between Investor Trading Strategies and Returns around Earnings Announcements

Abstract

In the context of the secondary market of India, this article explores
the link between financial success and stock performance. The
purpose of this study is to see if a company's financial performance
affects company’s share prices and if there are any differences in
share prices between small-cap and large-cap enterprises. To do
this, a complete study of historical financial data and related stock
returns of a group of companies trading on the Indian stock
exchange is performed. To assess the impact of financial
performance indicators on stock returns, various financial
performance indicators such as profitability, liquidity, and solvency
are assessed.
The research investigates the linked relationship between financial
performance and stock returns using CAPM Model and statistical
approaches such as regression analysis and hypothesis testing. The
findings will offer light on the factors that determine the stock
markets outcomes in secondary market of India, as well as the
impact of financial performance on investor decision-making. The
study's findings have significance for investors, financial analysts,
and legislators since they can inform investment strategies,
company financial planning, and regulatory actions. Understanding
the relationships between financial performance and stock returns is
essential for making sound investing decisions and achieving
optimal portfolio performance.