In the vast majority of cases, shareholder returns (positive/negative) for any period are associated with “financial performance” patterns (positive/negative) of a company in relation to previous plausible patterns expected for that period and/or trading by corporate insiders or market abuse on the stock exchange. These two schools of thought have their impact on stock prices (increase/decrease) which can also be observed in Pakistan at KSE. Stock price jumps are clustered over time. There is about a 50/50 chance that the extreme return days following a large jump will be of the same sign (Turner and Weigel, November 1992). In this study, ratio analysis is applied to see the observed changes in the stock price which are earned by the company only due to the good financial position. Corporations issue financial statements for external parties, especially common shareholders usually referred to as investors in the stock market. Investors invest in the stock market only after witnessing the volatility of stock returns, but the sheer usefulness of accounting information to investors may inform their decisions over time due to changes in the relevance of accounting information even if there is no change in the absolute amount of information (Melvin C. O'Connor, April 1973). Financial accounting information has become less relevant over time, and returns based on cash flows and earnings have not changed significantly over time (Jennifer and Katherine, Fall 1999). But many studies have shown that investors use this publicly available information for their investment analysis which usually includes financial analysis of the company and use ratio analysis for that purpose. These ratio analysis techniques provide them value...... half of paper ...... of California San Diego and CEPR,26. Rees (1997) The impact of dividends, debt and investment on variable models. Journal of Corporate Finance and Accounting 24(7) and 8.27. Skinner and Sloan (January 2000). Earnings surprises, growth expectations and stock returns, or don't let an earnings torpedo sink your portfolio. First University of Michigan Business School version: May 1998 This version: January 200028. Sloan (July 1996). Stock prices fully reflect accrual and cash flow on future earnings. The audit, vol. 73, no. 3, pp. 289-31529. State Bank of Pakistan Balance Sheet Analysis Report (http://www.sbp.org.pk/publications/index2.asp)30. Turner and Weigel, 1992. Daily Stock Market Volatility: 1928-1989. Management Sciences, Vol. 38, No. 11.(pp. 1586-1609 Published by: INFORMS Stable Retrieved from URL: http://www.jstor.org/stable/2632471