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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: 249443 who wrote (15633)	10/11/2002 10:29:40 PM
From: Night Trader	Respond to of 78627

Mr Money, I found this passage "The results of this estimation indicate that most of the variables are significantly associated with one-year returns (results not tabulated). After controlling for the other variables, only ROA, ∆ROA and CFO lacked statistical significance. All other variables were significant in the predicted direction, with ∆TURN, ∆LEVER and EQ_OFFER displaying the strongest association with future returns." a little confusing when compared with the correlations with returns in Table 2 which showed almost the opposite. I know that significance and correlation are not the same thing but they shouldn't be 180 degrees from each other.

To: 249443 who wrote (15633)	10/12/2002 4:17:51 AM
From: Paul Senior	Read Replies (1) \| Respond to of 78627

About that report, mrcjmoney: Reads to me like a thesis submitted in fulfillment of a master's degree. Enough F-scores there to sate any statistician. -g-. Nevertheless, there are some interesting conclusions. I admit to just glancing through Mr. Piotroski's 63-pager, so my understanding of the report or the significance of its conclusions may be very wrong. Unlike what we talk about around here - price/book - the report uses the inverse: Book value to Market price at year-end. That ratio is called BM. High BM stocks are of interest to the author and to value investors. (A high BM number equates to standard value criterion: low price-to-book.) From what I can tell, the study is of high BM stocks grouped into several categories to see which categories and relationships subsequently show the better stock market performance. p. 25: "Consistent with the findings of Lee and Swaminanthan (2000), this analysis shows that the majority of the high BM portfolio's "winners" are in the low share portfolio turnover. p.38 (You have to look closely to find the conclusions section!) Apparently the best stocks to search out and study (candidates for financial analysis) are the high BM stocks of small and medium size firms with low share turnover and no analyst following. It seems that the strategy producing the greatest results is "buying expected winners and shorting expected losers". (p.38) (I missed something, because I didn't see how that conclusion follows from the tables and numbers and calculations.) While low price/book effect has been known for a long time, Fama (he's an efficient-market type professor/researcher) has written that using the effect as a basis for stock selection is risky because there is evidence that such companies are selling the way they are (with low p/book) because they are the very companies that have problems. (If I understand the argument correctly). Anyway... Piotroski seems to take issue with that, at least in some instances (p. 39). There's also a discussion of how earnings announcements don't get factored quickly into the stock price. That's it...running out of steam for 2nite... Paul Senior