They do not shed light on the linkage between return and risk. The CAPM analysis helps in understanding the trade-off for each category of stock, i.e. growth, income and value stock.
Short term momentum analysis represents the change experienced by stock prices over a specified period of time. The examination of recent past performance represents the status of the short term investments.
Comparison of annualized average return over a market return enables investors to understand the return generating capacity and the performance of stocks.
Global markets crashed after the 2008 recession is one of the best examples. In such a scenario, trend analysis of stocks using a comparison of average returns and market returns provides an investor with information to make optimal investment decisions.
Due to diverse impacts and severe threats to investors, there is a need to examine the annual average returns and market returns of stocks in presence of financial crisis.
The annual average returns of a stock define the earning possibility of investor from a particular investment whereas the market return states the return deriving capacity of all stocks traded in the market.