Did What Works on Wall Street Stop Working?

James P. O’Shaughnessy’s What Works on Wall Street has long been one of my favorite books on investing. Not because it’s so readable—it includes pages and pages of backtests that are a real slog to get through. And not because it’s impeccable—there are some odd omissions, which I’ll get to later. And not because it strikes an estimable balance—there’s simply not enough about accounting measures, and what’s there is somewhat weak. . . .

Why Piotroski’s F-Score No Longer Works

In 2000, Joseph D. Piotroski was a young associate professor of accounting at the University of Chicago Graduate School of Business, having obtained his Ph.D. from the University of Michigan the previous summer. That year he published a paper called “Value Investing: The Use of Historical Financial Statement Information to Separate Winners from Losers” in the Journal of Accounting Research. Seldom has an accounting paper made such a huge splash.

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