Adding value to value stocks in Indian stock market: an empirical analysis
Purpose The purpose of this study is to examine the relevance of an accounting based fundamental strategy in adding value to value stocks in Indian stock market. The fundamentals based investment strategy "F score" given by Joseph Piotroski, has been used on stocks having high book to market ratio to eliminate the firms with poor future prospects from the entire portfolio of value stocks. Design/methodology/approach The market adjusted performance of all the firms in the sample is examined using one sample t test. Further, F score of all the firms in the sample is calculated and the independent sample t test has been used to examine the significance of mean difference between high score and low score firms. Finally, the predictive ability of F score in explaining the overall stock returns is examined using panel data regression analysis. Findings Results reveal that the mean market adjusted return of stocks, meeting all constructs of F score is significantly larger than the entire portfolio of valu.