Building of F-Score-Like Models on the Example of the Polish Stock Market
Theoretical background: Value investing is one of the most popular investing approaches. In their frame, there could be a high B/M investing strategy identified. F-Score, developed by Piotroski, is a scoring model applied to the sample of high B/M entities. Its purpose is to select companies with st...
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| Format: | Article |
| Language: | English |
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Maria Curie-Skłodowska University, Lublin, Poland
2023-05-01
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| Series: | Annales Universitatis Mariae Curie-Skłodowska Sectio H, Oeconomia |
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| Online Access: | https://journals.umcs.pl/h/article/view/14885 |
| _version_ | 1797767140508434432 |
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| author | Bartłomiej Pilch |
| author_facet | Bartłomiej Pilch |
| author_sort | Bartłomiej Pilch |
| collection | DOAJ |
| description | Theoretical background: Value investing is one of the most popular investing approaches. In their frame, there could be a high B/M investing strategy identified. F-Score, developed by Piotroski, is a scoring model applied to the sample of high B/M entities. Its purpose is to select companies with strong financial foundations and buy their shares for the investment portfolio to generate positive market-adjusted returns in the following periods. The effectiveness of this model was mostly empirically confirmed, especially regarding developed markets.
Purpose of the article: The main aim of the paper was to build F-Score-like models based on the data from the Polish stock market. The main hypothesis concerned the higher effectiveness of such models than F-Score, as the specificity of a given market should result in a better fit to the data.
Research methods: Building of the models based on the discriminant analysis and formation of the investment portfolios based on the indications of these models as well as F-Score. Finally, backtesting of the portfolios built to assess their effectiveness. The sample covered most of the Polish-listed companies. The period taken into account was 2012–2022.
Main findings: Models built (X-Score and Y-Score) were less efficient than F-Score. Moreover, they led to generating negative rates of return (both raw and market-adjusted). On the other hand, using of F-Score for the analyzed period seems to be purposeful due to the 1.35% mean annual market-adjusted return generated. Apart from the scoring models analyzed, the research partially confirmed the advisability of using a high B/M investing strategy. Generally, the results obtained are in line with the findings of most of other authors –regarding the F-Score effectiveness. However, an approach based on Mohanram’s idea – using the differences between absolute values of a given variable and median from the sample – proved to be inadequate in the Polish stock market. |
| first_indexed | 2024-03-12T20:35:29Z |
| format | Article |
| id | doaj.art-b3c62a180efd4aeab68986d206a0aecf |
| institution | Directory Open Access Journal |
| issn | 0459-9586 |
| language | English |
| last_indexed | 2024-03-12T20:35:29Z |
| publishDate | 2023-05-01 |
| publisher | Maria Curie-Skłodowska University, Lublin, Poland |
| record_format | Article |
| series | Annales Universitatis Mariae Curie-Skłodowska Sectio H, Oeconomia |
| spelling | doaj.art-b3c62a180efd4aeab68986d206a0aecf2023-08-01T14:25:12ZengMaria Curie-Skłodowska University, Lublin, PolandAnnales Universitatis Mariae Curie-Skłodowska Sectio H, Oeconomia0459-95862023-05-0157115518010.17951/h.2023.57.1.155-18010173Building of F-Score-Like Models on the Example of the Polish Stock MarketBartłomiej Pilch0Cracow University of EconomicsTheoretical background: Value investing is one of the most popular investing approaches. In their frame, there could be a high B/M investing strategy identified. F-Score, developed by Piotroski, is a scoring model applied to the sample of high B/M entities. Its purpose is to select companies with strong financial foundations and buy their shares for the investment portfolio to generate positive market-adjusted returns in the following periods. The effectiveness of this model was mostly empirically confirmed, especially regarding developed markets. Purpose of the article: The main aim of the paper was to build F-Score-like models based on the data from the Polish stock market. The main hypothesis concerned the higher effectiveness of such models than F-Score, as the specificity of a given market should result in a better fit to the data. Research methods: Building of the models based on the discriminant analysis and formation of the investment portfolios based on the indications of these models as well as F-Score. Finally, backtesting of the portfolios built to assess their effectiveness. The sample covered most of the Polish-listed companies. The period taken into account was 2012–2022. Main findings: Models built (X-Score and Y-Score) were less efficient than F-Score. Moreover, they led to generating negative rates of return (both raw and market-adjusted). On the other hand, using of F-Score for the analyzed period seems to be purposeful due to the 1.35% mean annual market-adjusted return generated. Apart from the scoring models analyzed, the research partially confirmed the advisability of using a high B/M investing strategy. Generally, the results obtained are in line with the findings of most of other authors –regarding the F-Score effectiveness. However, an approach based on Mohanram’s idea – using the differences between absolute values of a given variable and median from the sample – proved to be inadequate in the Polish stock market.https://journals.umcs.pl/h/article/view/14885f-scorebook-to-marketvalue investinginvestment portfolioscoring model |
| spellingShingle | Bartłomiej Pilch Building of F-Score-Like Models on the Example of the Polish Stock Market Annales Universitatis Mariae Curie-Skłodowska Sectio H, Oeconomia f-score book-to-market value investing investment portfolio scoring model |
| title | Building of F-Score-Like Models on the Example of the Polish Stock Market |
| title_full | Building of F-Score-Like Models on the Example of the Polish Stock Market |
| title_fullStr | Building of F-Score-Like Models on the Example of the Polish Stock Market |
| title_full_unstemmed | Building of F-Score-Like Models on the Example of the Polish Stock Market |
| title_short | Building of F-Score-Like Models on the Example of the Polish Stock Market |
| title_sort | building of f score like models on the example of the polish stock market |
| topic | f-score book-to-market value investing investment portfolio scoring model |
| url | https://journals.umcs.pl/h/article/view/14885 |
| work_keys_str_mv | AT bartłomiejpilch buildingoffscorelikemodelsontheexampleofthepolishstockmarket |