Are the AAII stock screens a useful tool for investors?

Authors

  • Frederick P. Schadler College of Business, East Carolina University
  • Brett D. Cotten College of Business, East Carolina University

DOI:

https://doi.org/10.61190/fsr.v17i3.4917

Keywords:

Behavioral finance, Investment strategies, Abnormal returns, Market efficiency, Stock screens

Abstract

The American Association of Individual Investors (AAII) offers a variety of screening tools to help investors select stocks. We analyze the effectiveness of these tools. While we find support for AAII's statement that 91% of their screened portfolios beat the S&P 500, we note that this overstates the effectiveness of their screens. Many of the return differences are not statistically significant, and their analysis ignores transactions costs and risk differences. Our analysis reveals that when transactions costs are considered, 32% significantly beat the S&P 500, and 26% of low transaction cost strategies significantly beat their best-fit indices.

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Published

2008-09-30

Issue

Vol. 17 No. 3 (2008): FSR Fall 2008

Section

New Original Submission

License

Copyright (c) 2008 Academy of Financial Services

Creative Commons License

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Author(s) retain copyright and grant the Journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution-NonCommercial 4.0 International License that allows to share the work with an acknowledgment of the work's authorship and initial publication in this Journal.

This license allows the author to remix, tweak, and build upon the original work non-commercially. The new work(s) must be non-commercial and acknowledge the original work.

How to Cite

Are the AAII stock screens a useful tool for investors?. (2008). Financial Services Review, 17(3), 185-201. https://doi.org/10.61190/fsr.v17i3.4917