A Comparison of Graham and Piotroski Investment Models Using Accounting Information and Efficacy Measurement

• In Event: Financial Accounting and Reporting 2

Abstract

The objective of this paper is to examine the investment models of Benjamin Graham and Joseph Piotroski which use accounting data only, and compare the efficacy of these two models using different combinations of screening and ranking methods. We will primarily focus on examining the screening rules of Graham and Piotroski star models, while pairing with different sets of ranking systems suggested by the star investment experts or implied in the star investment experts’ strategies. The results show that Piotrosky screening with Graham ranking generates highest return with second highest volatility among different combinations. Highest volatility is noticed in Graham screening with O’Neil ranking method. It is also surprising that Piotrosky screening with Graham ranking generates highest result, whereas return from Graham screening with Piotrosky ranking is very insignificant. However, Piotrosky screening with Piotrosky ranking shows second highest return.

Authors

• Nusrat Jahan, University of Akron

• John J Cheh, University of Akron

• Il-Woon Kim, University of Akron