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Is value investing based on scoring models effective? The verification of F-Score-based strategy in the Polish stock market

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  • Pilch Bartłomiej

    (Cracow University of Economics, Institute of Finance, ul. Rakowicka 27, 31-510 Kraków, Poland)

Abstract

The aim of the paper is to analyse the effectiveness of F-Score-like models using the example of the Polish stock market. F-Score is a scoring model based on a high B/M investing strategy, which uses fundamental signals to assess the economic condition of an entity. So far, its effectiveness has been generally proven in numerous stock markets worldwide. However, no comprehensive study focusing on the Polish market has been conducted. Therefore, F-Score and similar models (FS-Score and PiotroskiTrfm) were analysed in this regard. It was shown that companies with higher scores generated positive both raw and market-adjusted returns on average. However, they were lower than the mean returns of low-score companies (for FS-Score) or total high B/M portfolio (regarding F-Score and PiotroskiTrfm). The results of the study show that F-Score, FS-Score and PiotroskiTrfm are generally effective investing tools. However, it might be more advisable for value investors to choose a total high B/M portfolio instead of shares of high-score entities according to F-Score or PiotroskiTrfm.

Suggested Citation

  • Pilch Bartłomiej, 2023. "Is value investing based on scoring models effective? The verification of F-Score-based strategy in the Polish stock market," Economics and Business Review, Sciendo, vol. 9(4), pages 121-152, December.
    • Handle: RePEc:vrs:ecobur:v:9:y:2023:i:4:p:121-152:n:2
    DOI: 10.18559/ebr.2023.4.1075
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    References listed on IDEAS

    as
    1. Pradip Banerjee & Soumya G. Deb, 2017. "Abnormal returns using accounting information within a value portfolio," Accounting Research Journal, Emerald Group Publishing Limited, vol. 30(01), pages 73-88, May.
    2. Irfan Safdar, 2016. "Industry competition and fundamental analysis," Journal of Accounting Literature, Emerald Group Publishing Limited, vol. 37(1), pages 36-54, October.
    3. Eero J. Pätäri & Timo H. Leivo & Janne Hulkkonen & J. V. Samuli Honkapuro, 2018. "Enhancement of value investing strategies based on financial statement variables: the German evidence," Review of Quantitative Finance and Accounting, Springer, vol. 51(3), pages 813-845, October.
    4. Jarno Tikkanen & Janne Äijö, 2018. "Does the F-score improve the performance of different value investment strategies in Europe?," Journal of Asset Management, Palgrave Macmillan, vol. 19(7), pages 495-506, December.
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    More about this item

    Keywords

    F-Score; high B/M; investment strategy; value investing;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • M20 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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