14 min

Finding Quality Value Stocks With Joseph Piotroski's F Score Methodology Excess Returns

    • Investing

Research shows that value stocks can generate an excess return because the market tends to overestimate their problems, and value investors benefit when it realizes that. But despite that being true on average, many value stocks actually have even bigger problems than the market has priced in. This week, we look at one of the quantitative strategies we follow that attempts to separate the winners from the losers within the value investing space.

We discuss Joseph Piotroski's paper "Value Investing: The Use of Historical Financial Statement Information to Separate Winners from Losers". In the paper, Piotroski developed a series of nine fundamental tests (which he called the F Score) to identify value stocks that are more likely to generate an excess return going forward. He found that stocks with high F Scores showed significant improvements in performance relative to stocks with low F Scores. We examine the nine criteria used in this strategy in detail and talk about how it can be implemented in an investment strategy. 

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https://www.validea.com/excess-returns-podcast

FIND OUT MORE ABOUT VALIDEA

https://www.validea.com

FOLLOW OUR BLOG

https://blog.validea.com

FIND OUT MORE ABOUT VALIDEA CAPITAL

https://www.valideacapital.com

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Twitter: https://twitter.com/practicalquant

LinkedIn: https://www.linkedin.com/in/jack-forehand-8015094

FOLLOW JUSTIN

Twitter: https://twitter.com/jjcarbonneau

LinkedIn: https://www.linkedin.com/in/jcarbonneau

Research shows that value stocks can generate an excess return because the market tends to overestimate their problems, and value investors benefit when it realizes that. But despite that being true on average, many value stocks actually have even bigger problems than the market has priced in. This week, we look at one of the quantitative strategies we follow that attempts to separate the winners from the losers within the value investing space.

We discuss Joseph Piotroski's paper "Value Investing: The Use of Historical Financial Statement Information to Separate Winners from Losers". In the paper, Piotroski developed a series of nine fundamental tests (which he called the F Score) to identify value stocks that are more likely to generate an excess return going forward. He found that stocks with high F Scores showed significant improvements in performance relative to stocks with low F Scores. We examine the nine criteria used in this strategy in detail and talk about how it can be implemented in an investment strategy. 

SEE LATEST EPISODES

https://www.validea.com/excess-returns-podcast

FIND OUT MORE ABOUT VALIDEA

https://www.validea.com

FOLLOW OUR BLOG

https://blog.validea.com

FIND OUT MORE ABOUT VALIDEA CAPITAL

https://www.valideacapital.com

FOLLOW JACK

Twitter: https://twitter.com/practicalquant

LinkedIn: https://www.linkedin.com/in/jack-forehand-8015094

FOLLOW JUSTIN

Twitter: https://twitter.com/jjcarbonneau

LinkedIn: https://www.linkedin.com/in/jcarbonneau

14 min