Are the AAII stock screens a useful tool for investors?
DOI:
https://doi.org/10.61190/fsr.v17i3.4917Keywords:
Behavioral finance, Investment strategies, Abnormal returns, Market efficiency, Stock screensAbstract
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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