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Using the altman z-score to optimize value investing strategies: an empirical analysis
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Resumo(s)
This thesis investigates whether value strategies in the S&P500 can be improved by filtering
out potentially distressed stocks. For this purpose, various value signals are combined with the
Altman Z-Score, a widely used insolvency forecasting method. Through an empirical analysis
of in-sample and out-of-sample data, this paper shows that while combinations of enterprise
multiples and the Z-Score yield the highest risk-adjusted returns in the in-sample period, these
strategies cannot outperform the market or corresponding value-only strategies in the out-of sample period. The hypothesis that strategies with the Z-Score as a safety filter can outperform
classical value strategies thus cannot be proven.
Descrição
Palavras-chave
Quantitative investing Financial markets Factor investing Value investing Quality investing Altman z-score