A comparison of Graham and Piotroski investment models using accounting information and efficacy measurement

Nusrat Jahan, John J. Cheh, Il-woon Kim

Abstract


We examine the investment models of Benjamin Graham and Joseph Piotroski and compare the efficacy of these two models by running backtest, using screening rules and ranking systems built in Portfolio 123. Using different combinations of screening rules and ranking systems, we also examine the performance of Piotroski and Graham investment models. We find that the combination of Piotroski and Graham investment models performs better than S&P 500. We also find that the Piotroski screening with Graham ranking generates the highest average annualized return among different combinations of screening rules and ranking systems analyzed in this paper. Overall, our results show a profound impact of accounting information on investor’s decision making.    


Keywords


Investment models; Ranking; Rebalancing periods; Screening.

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References


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DOI: http://dx.doi.org/10.18533/jefs.v4i1.219

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