2015 Conference
October 15–16, 2015
Orlando, FL
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The Indivdual Investor and The Piotroski Screen Variables
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Value Investing, Fundamental Analysis
Very short description for use in the program to help attendees understand more than a title can describe
This paper examines the breakdown in the effectiveness of the Piotroski (2000) fundamental analysis screen for value stocks. While the Piotroski screen is very popular with individual investors, recent research shows that it is ineffective after Piotroski's original sample period. This paper uses stepwise regression to test the effectiveness of the individual components of Piotroski's screen and reaches three conclusions: 1) some of the variables have no significant impact on future returns, making the screen over specified; 2) more critically, other variables in the screen are likely to provide perverse predictions for future returns; 3) those variables that do effectively predict future returns in some periods are inconsistent in other periods. Overall our conclusion is that the Piotroski screen should be used with caution.