Joseph Piotroski
Encyclopedia
Joseph D. Piotroski is an American professor who specializes in accounting and financial reporting issues. As of October 2010 he serves as associate professor of accounting at the Stanford University Graduate School of Business. Prior to that, he taught at the University of Chicago Graduate School of Business from July 1999 to June 2007.
Piotroski is known in the investing world for an influential 2000 paper he wrote while at the University of Chicago
, entitled Value Investing: The Use of Historical Financial Statement Information to Separate Winners from Losers. In the piece, Piotroski laid out a way to buy and short stocks using several accounting-based criteria. His back-testing showed that the method would have produced returns well above the broader market averages over a two-decade period.
Piotroski is a member of the Editorial Advisory Boards of The Accounting Review, the Journal of Accounting Research, and the Journal of Accounting and Economics. His research has been cited in publications such as Bloomberg BusinessWeek, SmartMoney
Magazine, and Investor's Business Daily
.
in the state of Illinois. From 1989 to 1992, he then worked as a senior tax associate at the firm Coopers & Lybrand.
In 1994, Piotroski received an M.B.A. in finance from Indiana University
. While at Indiana, he was a lecturer in Introduction to Financial Accounting from 1992-1994. He received his Ph.D. in accounting from the University of Michigan
in 1999 and served as a graduate research assistant and graduate instructor there from 1994-1999.
(Vol. 38, Supplement: Studies on Accounting Information and the Economics of the Firm).
The paper examined whether a simple accounting-based fundamental analysis
stock selection strategy, when applied to a broad portfolio of high book-to-market firms, could impact returns for investors. He began by limiting his search to firms whose book/market ratios (the inverse of the price/book ratio) were in the top 20% of the market. He then ran those firms through an array of tests involving their balance sheets and income statements, using such metrics as the return on assets rate, current ratio
, change in gross margin, and change in asset turnover.
Through back-testing, Piotroski found that buying the top stocks in the market according to his methodology and shorting those that got the worst scores would have resulted in 23% annualized gains from 1976 through 1996, more than double the S&P 500 broad market index return. His findings were made available to a wider audience via SmartMoney
magazine and Bloomberg BusinessWeek.
Piotroski is known in the investing world for an influential 2000 paper he wrote while at the University of Chicago
University of Chicago
The University of Chicago is a private research university in Chicago, Illinois, USA. It was founded by the American Baptist Education Society with a donation from oil magnate and philanthropist John D. Rockefeller and incorporated in 1890...
, entitled Value Investing: The Use of Historical Financial Statement Information to Separate Winners from Losers. In the piece, Piotroski laid out a way to buy and short stocks using several accounting-based criteria. His back-testing showed that the method would have produced returns well above the broader market averages over a two-decade period.
Piotroski is a member of the Editorial Advisory Boards of The Accounting Review, the Journal of Accounting Research, and the Journal of Accounting and Economics. His research has been cited in publications such as Bloomberg BusinessWeek, SmartMoney
SmartMoney
SmartMoney The Wall Street Journal Magazine of Personal Business was launched in 1992 by Hearst Corporation and Dow Jones & Company. In 2010, Hearst sold its stake to Dow Jones. Its first editor was Norman Pearlstine....
Magazine, and Investor's Business Daily
Investor's Business Daily
Investor's Business Daily is a national newspaper in the United States, published Monday through Friday, that covers international business, finance, and the global economy...
.
Education and early career
Piotroski received a B.S. in accounting from the University of Illinois in 1989, the same year in which he became a certified public accountantCertified Public Accountant
Certified Public Accountant is the statutory title of qualified accountants in the United States who have passed the Uniform Certified Public Accountant Examination and have met additional state education and experience requirements for certification as a CPA...
in the state of Illinois. From 1989 to 1992, he then worked as a senior tax associate at the firm Coopers & Lybrand.
In 1994, Piotroski received an M.B.A. in finance from Indiana University
Indiana University
Indiana University is a multi-campus public university system in the state of Indiana, United States. Indiana University has a combined student body of more than 100,000 students, including approximately 42,000 students enrolled at the Indiana University Bloomington campus and approximately 37,000...
. While at Indiana, he was a lecturer in Introduction to Financial Accounting from 1992-1994. He received his Ph.D. in accounting from the University of Michigan
University of Michigan
The University of Michigan is a public research university located in Ann Arbor, Michigan in the United States. It is the state's oldest university and the flagship campus of the University of Michigan...
in 1999 and served as a graduate research assistant and graduate instructor there from 1994-1999.
Academic career
After leaving Michigan in 1999, Piotroski took a position as an assistant professor of accounting at the University of Chicago, a post he held from 1999-2003. He then became an associate professor of accounting at the school from 2003-2007. He left the University of Chicago in 2007 to take an associate professor of accounting position at Stanford University.Value investing research
Piotroski received widespread publicity within the investment community for his 2000 paper, Value Investing: The Use of Historical Financial Statement Information to Separate Winners from Losers, which appeared in the Journal of Accounting ResearchJournal of Accounting Research
The Journal of Accounting Research is a peer-reviewed academic journal associated with the University of Chicago. It was established in 1963 and is published by Wiley-Blackwell on behalf of the Accounting Research Center at the University of Chicago Booth School of Business.Its current editors are...
(Vol. 38, Supplement: Studies on Accounting Information and the Economics of the Firm).
The paper examined whether a simple accounting-based fundamental analysis
Fundamental analysis
Fundamental analysis of a business involves analyzing its financial statements and health, its management and competitive advantages, and its competitors and markets. When applied to futures and forex, it focuses on the overall state of the economy, interest rates, production, earnings, and...
stock selection strategy, when applied to a broad portfolio of high book-to-market firms, could impact returns for investors. He began by limiting his search to firms whose book/market ratios (the inverse of the price/book ratio) were in the top 20% of the market. He then ran those firms through an array of tests involving their balance sheets and income statements, using such metrics as the return on assets rate, current ratio
Current ratio
The current ratio is a financial ratio that measures whether or not a firm has enough resources to pay its debts over the next 12 months. It compares a firm's current assets to its current liabilities...
, change in gross margin, and change in asset turnover.
Through back-testing, Piotroski found that buying the top stocks in the market according to his methodology and shorting those that got the worst scores would have resulted in 23% annualized gains from 1976 through 1996, more than double the S&P 500 broad market index return. His findings were made available to a wider audience via SmartMoney
SmartMoney
SmartMoney The Wall Street Journal Magazine of Personal Business was launched in 1992 by Hearst Corporation and Dow Jones & Company. In 2010, Hearst sold its stake to Dow Jones. Its first editor was Norman Pearlstine....
magazine and Bloomberg BusinessWeek.
External links
- Stanford University Graduate School of Business - Faculty Profiles - Joseph D Piotroski
- Social Science Research NetworkSocial Science Research NetworkThe Social Science Research Network is a website devoted to the rapid dissemination of scholarly research in the social sciences and humanities. SSRN is viewed as particularly strong in the fields of economics, finance, accounting, management, and law. SSRN was founded in 1994 by Michael Jensen ...
- Joseph D. Piotroski's Scholarly Papers - Chicago GSB Magazine - An Accountant Looks at the Market
- ForbesForbesForbes is an American publishing and media company. Its flagship publication, the Forbes magazine, is published biweekly. Its primary competitors in the national business magazine category are Fortune, which is also published biweekly, and Business Week...
- Legendary Investor - Piotroski Profits, 23 February 2009