{"id":24534,"date":"2024-06-21T18:00:00","date_gmt":"2024-06-21T10:00:00","guid":{"rendered":"https:\/\/www.tejwin.com\/?post_type=insight&#038;p=24534"},"modified":"2024-10-31T16:32:28","modified_gmt":"2024-10-31T08:32:28","slug":"f-score-strategy","status":"publish","type":"insight","link":"https:\/\/www.tejwin.com\/en\/insight\/f-score-strategy\/","title":{"rendered":"F-score Strategy: Identifying Undervalued Quality Stocks"},"content":{"rendered":"\n<figure class=\"wp-block-image aligncenter size-full caption-align-center\"><img fetchpriority=\"high\" decoding=\"async\" width=\"5168\" height=\"3448\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/engin-akyurt-bPiuY2ZSlvU-unsplash.jpg\" alt=\"F-score strategy\" class=\"wp-image-24409\" srcset=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/engin-akyurt-bPiuY2ZSlvU-unsplash.jpg 5168w, https:\/\/www.tejwin.com\/wp-content\/uploads\/engin-akyurt-bPiuY2ZSlvU-unsplash-300x200.jpg 300w, https:\/\/www.tejwin.com\/wp-content\/uploads\/engin-akyurt-bPiuY2ZSlvU-unsplash-1024x683.jpg 1024w, https:\/\/www.tejwin.com\/wp-content\/uploads\/engin-akyurt-bPiuY2ZSlvU-unsplash-150x100.jpg 150w, https:\/\/www.tejwin.com\/wp-content\/uploads\/engin-akyurt-bPiuY2ZSlvU-unsplash-768x512.jpg 768w, https:\/\/www.tejwin.com\/wp-content\/uploads\/engin-akyurt-bPiuY2ZSlvU-unsplash-1536x1025.jpg 1536w, https:\/\/www.tejwin.com\/wp-content\/uploads\/engin-akyurt-bPiuY2ZSlvU-unsplash-2048x1366.jpg 2048w\" sizes=\"(max-width: 5168px) 100vw, 5168px\" \/><figcaption class=\"wp-element-caption\">Photo by <a href=\"https:\/\/unsplash.com\/@enginakyurt\" class=\"ek-link\" target=\"_blank\" rel=\"noopener\">engin akyurt<\/a> on <a href=\"https:\/\/unsplash.com\/\" class=\"ek-link\" target=\"_blank\" rel=\"noopener\">Unsplash<\/a><\/figcaption><\/figure>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_81 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69f10c9dea240\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"ez-toc-cssicon\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69f10c9dea240\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.tejwin.com\/en\/insight\/f-score-strategy\/#Highlight\" >Highlight<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.tejwin.com\/en\/insight\/f-score-strategy\/#Preface\" >Preface<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.tejwin.com\/en\/insight\/f-score-strategy\/#F-score_Strategy\" >F-score Strategy<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.tejwin.com\/en\/insight\/f-score-strategy\/#Backtest_the_F-score_Strategy\" >Backtest the F-score Strategy<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.tejwin.com\/en\/insight\/f-score-strategy\/#Performance_Evaluation_Using_Pyfolio\" >Performance Evaluation Using Pyfolio<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.tejwin.com\/en\/insight\/f-score-strategy\/#Conclusion\" >Conclusion<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.tejwin.com\/en\/insight\/f-score-strategy\/#Extended_Reading\" >Extended Reading<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Highlight\"><\/span>Highlight<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Article Difficulty\uff1a\u2605\u2605\u2606\u2606\u2606<\/li>\n\n\n\n<li>Introduce the nine selection criteria of the F-score strategy.<\/li>\n\n\n\n<li>Use Pipeline to filter stocks that meet the nine indicators of the F-score strategy and generate buy signals.<\/li>\n\n\n\n<li>Backtest the quarterly rebalancing performance of the F-score strategy.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Preface\"><\/span>Preface<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In today&#8217;s stock market, investors face the challenge of choosing from many stocks, with many hoping to find undervalued stocks with solid fundamentals. However, market volatility and information asymmetry often make this goal difficult to achieve. In this context, the Piotroski F-score, also known as the Piotroski score or F-score, has become an important tool for investors.<\/p>\n\n\n\n<p>Conceived by the esteemed former University of Chicago professor Joseph Piotroski, the F-score strategy is a comprehensive evaluation of nine financial report conditions. This strategy serves as a reliable guide for investors, providing a holistic view of a company&#8217;s financial health. It encompasses aspects of profitability, safety, and growth, offering a multidimensional analytical framework that enables investors to assess a company&#8217;s potential value more comprehensively. To delve into the performance of the F-score in the Taiwan stock market, <span style=\"text-decoration: underline;\" class=\"ek-underline\">this article construct the F-score strategy, thereby equipping investors with a deeper understanding of the investment benefits that the F-score can potentially unlock.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"F-score_Strategy\"><\/span>F-score Strategy<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>According to the <a href=\"https:\/\/www.chicagobooth.edu\/~\/media\/FE874EE65F624AAEBD0166B1974FD74D.pdf\" class=\"ek-link\" target=\"_blank\" rel=\"noopener\">paper<\/a> by Professor Joseph Piotroski, to identify undervalued stocks with relatively stable profitability, safety, and growth, the F-score strategy is constructed through the following two steps to generate trading signals:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>Identify the<strong> top 20% of stocks in the market based on their Book-to-Market Ratio (BM Ratio).<\/strong><br>p.s. A higher BM Ratio indicates that the stock is more undervalued, as its trading price is lower than its asset value.<\/li>\n\n\n\n<li><strong>Calculate the score based on the 9 fundamental criteria of the F-score<\/strong>. Each criterion met earns 1 point. We will buy stocks that score 8 or 9 and rebalance the portfolio quarterly.<\/li>\n<\/ol>\n\n\n\n<p>The 9 fundamental criteria of the F-score strategy are as follows: <\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-cyan-blue-color\">Profitability<\/mark><\/strong>\n<ol class=\"wp-block-list\">\n<li>Return on Assets (ROA) &gt; 0<\/li>\n\n\n\n<li>Current year ROA &gt; previous year ROA<\/li>\n\n\n\n<li>Operating cash flow &gt; 0<\/li>\n\n\n\n<li>Operating cash flow &gt; net income after tax<\/li>\n<\/ol>\n<\/li>\n\n\n\n<li><strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-cyan-blue-color\">Safety<\/mark><\/strong>\n<ol class=\"wp-block-list\">\n<li>Long-term debt for the current year &lt; previous year<\/li>\n\n\n\n<li>Current ratio for the current year &gt; previous year<\/li>\n\n\n\n<li>No new shares issued in the previous year<\/li>\n<\/ol>\n<\/li>\n\n\n\n<li><strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-cyan-blue-color\">Growth<\/mark><\/strong>\n<ol class=\"wp-block-list\">\n<li>Gross margin for the current year &gt; previous year<\/li>\n\n\n\n<li>Asset turnover ratio for the current year &gt; previous year<\/li>\n<\/ol>\n<\/li>\n<\/ul>\n\n\n\n<p>Next, let&#8217;s generate the trading signals required for the F-score strategy.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Select Stock Pool and Trading Data Import<\/h3>\n\n\n\n<p>First, we obtain undervalued stocks through the following two steps:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>Obtain the stock symbols of all listed and OTC common stocks on May 6, 2019 by using <a href=\"https:\/\/www.tejwin.com\/en\/databank-solution\/market-data\/\" class=\"ek-link\">TEJ market Databank<\/a><\/li>\n\n\n\n<li>Use <strong><a href=\"https:\/\/www.tejwin.com\/en\/databank-solution\/financial-data\/\" class=\"ek-link\"><span style=\"text-decoration: underline;\" class=\"ek-underline\">TEJ Quantitative Investment Database<\/span><\/a><\/strong>  to get the Price-Book Ratio ( PB ratio ) of the above stocks to calculate the BM Ratio, thereby <strong>obtaining the top 20% of stocks by BM Ratio.<\/strong><br>p.s.&nbsp;<strong>PB Ratio and BM Ratio are reciprocals.<\/strong><\/li>\n<\/ol>\n\n\n\n<p>With the backtest period set from May 6, 2019, to December 31, 2023, we then import the price and volume data of the above 340 undervalued stocks and the TAIEX-Total Return Index (IR0001) as the performance benchmark.<\/p>\n\n\n\n<figure class=\"wp-block-image aligncenter size-full\"><img decoding=\"async\" width=\"377\" height=\"482\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/top_20_percert_data-1.png\" alt=\"F-score strategy\" class=\"wp-image-24652\" srcset=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/top_20_percert_data-1.png 377w, https:\/\/www.tejwin.com\/wp-content\/uploads\/top_20_percert_data-1-235x300.png 235w, https:\/\/www.tejwin.com\/wp-content\/uploads\/top_20_percert_data-1-117x150.png 117w\" sizes=\"(max-width: 377px) 100vw, 377px\" \/><figcaption class=\"wp-element-caption\">The top 20% of stocks by BM Ratio<\/figcaption><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\">Obtain Financial Data for the F-score Strategy<\/h3>\n\n\n\n<p>To calculate the financial criteria needed for the F-score, we use TEJ Quantitative Investment Database to fetch the following 9 financial data points:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>ROA<\/strong>: Return_on_Total_Assets_A_percent<\/li>\n\n\n\n<li><strong>Operating cash flow<\/strong>: Cash_Flow_from_Operating_Activities<\/li>\n\n\n\n<li><strong>Net income<\/strong>: Net_Income_Attributable_to_Parent<\/li>\n\n\n\n<li><strong>Long-term debt<\/strong>: Total_Noncurrent_Liabilities<\/li>\n\n\n\n<li><strong>Current ratio<\/strong>: Current_Ratio<\/li>\n\n\n\n<li><strong>New shares issued (in thousands)<\/strong>: Cash_Capital_Increase_Thousand_Shares<\/li>\n\n\n\n<li><strong>Gross margin rate<\/strong>: Gross_Margin_Rate_percent<\/li>\n\n\n\n<li><strong>Asset turnover<\/strong>: Total_Assets_Turnover<\/li>\n<\/ol>\n\n\n\n<div style=\"border: 1px black; border-style: solid none; text-align: center; border-color: #296580; padding: 24px; margin-top: 24px; margin-bottom: 24px;\">\n<p style=\"margin: 0px; font-size: 24px; font-weight: bold; line-height: 1.5;\">Obtain All-encompassing Quantitative Data Above Through TEJ!<\/p>\n<div style=\"margin-top: 32px;\"><strong><a style=\"border: none; border-radius: 4px; background-color: #296580; color: white; font-size: 20px; width: fit-content; text-decoration: none; padding: 12px 30px 12px 30px;\" href=\"https:\/\/www.tejwin.com\/en\/databank-solution\/financial-data\/\">TEJ Financial Databank<\/a><\/strong><\/div>\n<\/div>\n\n\n\n<h3 class=\"wp-block-heading\">Import Financial Data into Trading Environment<\/h3>\n\n\n\n<p>The <code>CustomDataset<\/code> class can import content from a database into Pipeline, facilitating subsequent backtesting. In this example, we use it to import the financial data we get from TEJ Quantitative Investment Database to calculate the F-score into Pipeline. Besides, before calculating the F-score, we use the <code>CustomFactor<\/code> function to define the following two factors:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>Calculate the<strong> YOY change of financial data.<\/strong><\/li>\n\n\n\n<li>Convert the data passing the F-score criteria to 1 and those failing to 0, for calculating the F-score.<\/li>\n<\/ol>\n\n\n\n<h3 class=\"wp-block-heading\">Create Quantitative Analysis Function<\/h3>\n\n\n\n<p>The <code>Pipeline()<\/code> function provides users with the ability to quickly process quantitative indicators and price-volume data of multiple stocks. In this case, we use it to handle:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Import stock price and financial data.<\/li>\n\n\n\n<li>Calculate year-over-year ( YOY ) changes in financial data and annual average cash capital increase ( to determine if new shares were issued ).<\/li>\n\n\n\n<li>Compute the F-score and generate trading signals in the &#8220;longs&#8221; column: <em>True <\/em>for F-score \u2265 8, <em>False <\/em>otherwise.<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-image aligncenter size-full caption-align-center\"><img decoding=\"async\" width=\"505\" height=\"378\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/pipeline-2.png\" alt=\"F-score strategy\" class=\"wp-image-24463\" srcset=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/pipeline-2.png 505w, https:\/\/www.tejwin.com\/wp-content\/uploads\/pipeline-2-300x225.png 300w, https:\/\/www.tejwin.com\/wp-content\/uploads\/pipeline-2-150x112.png 150w\" sizes=\"(max-width: 505px) 100vw, 505px\" \/><figcaption class=\"wp-element-caption\">Pipeline Results to be Used in Our Strategy<\/figcaption><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Backtest_the_F-score_Strategy\"><\/span>Backtest the F-score Strategy<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Utilize TEJ&#8217;s simplified version of the Zipline backtesting engine, <code>TargetPercentPipeAlgo<\/code>, which allows all backtesting parameters to be set in a single line, requiring only the strategy pipeline input for execution.<\/p>\n\n\n\n<p>Parameters adjusted for this strategy:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Backtest period ( start_session, end_session ): May 30, 2020, to December 31, 2023.<\/li>\n\n\n\n<li>Initial capital ( capital_base ): 10 million NTD.<\/li>\n\n\n\n<li>Trading days ( rebalancing days ): 15th of March, June, September, and December.<\/li>\n\n\n\n<li>Maximum leverage: 90%.<\/li>\n\n\n\n<li>Strategy pipeline: Evaluates the &#8220;longs&#8221; column from the Pipeline to determine trading on rebalancing days.<\/li>\n\n\n\n<li>Slippage model: <code>VolumeShareSlippage<\/code>.<\/li>\n\n\n\n<li>Commission model: <code>Custom_TW_Commission<\/code>.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Performance_Evaluation_Using_Pyfolio\"><\/span>Performance Evaluation Using Pyfolio<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<figure class=\"wp-block-image aligncenter size-full caption-align-center\"><img loading=\"lazy\" decoding=\"async\" width=\"1374\" height=\"727\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/chart_integrate-1.jpg\" alt=\"F-score strategy\" class=\"wp-image-29408\" srcset=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/chart_integrate-1.jpg 1374w, https:\/\/www.tejwin.com\/wp-content\/uploads\/chart_integrate-1-300x159.jpg 300w, https:\/\/www.tejwin.com\/wp-content\/uploads\/chart_integrate-1-1024x542.jpg 1024w, https:\/\/www.tejwin.com\/wp-content\/uploads\/chart_integrate-1-150x79.jpg 150w, https:\/\/www.tejwin.com\/wp-content\/uploads\/chart_integrate-1-768x406.jpg 768w\" sizes=\"(max-width: 1374px) 100vw, 1374px\" \/><figcaption class=\"wp-element-caption\">Backtesting Performance Compared to Benchmark<\/figcaption><\/figure>\n\n\n\n<p>Based on the table above, <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-cyan-blue-color\">the F-score strategy outperformed the market<\/mark><\/strong>. It achieved <mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-cyan-blue-color\">an annualized return of 27.83%, with an annualized volatility of approximately 19.1%.<\/mark> Furthermore, the Sharpe ratio stands at 1.38, and the alpha value is 0.11, indicating that the F-score strategy generates respectable excess returns for investors under relatively controlled risk. Examining the beta value of 0.79, it suggests that the performance of the F-score strategy is moderately correlated with the market trend, indicating that<mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-cyan-blue-color\"> the 9 stock selection criteria of the F-score strategy indeed help mitigate some systematic risks for investors.<\/mark> In the performance comparison chart, it can be observed that the F-score strategy experienced a smaller decline compared to the market in 2022, and after recovering from the bear market, it outperformed the market, underscoring the strategy&#8217;s strong profitability.<\/p>\n\n\n\n<figure class=\"wp-block-image aligncenter size-full caption-align-center\"><img loading=\"lazy\" decoding=\"async\" width=\"1367\" height=\"437\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/annual-return-1.png\" alt=\"F-score strategy\" class=\"wp-image-29410\" srcset=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/annual-return-1.png 1367w, https:\/\/www.tejwin.com\/wp-content\/uploads\/annual-return-1-300x96.png 300w, https:\/\/www.tejwin.com\/wp-content\/uploads\/annual-return-1-1024x327.png 1024w, https:\/\/www.tejwin.com\/wp-content\/uploads\/annual-return-1-150x48.png 150w, https:\/\/www.tejwin.com\/wp-content\/uploads\/annual-return-1-768x246.png 768w\" sizes=\"(max-width: 1367px) 100vw, 1367px\" \/><figcaption class=\"wp-element-caption\">Annual Returns Chart<\/figcaption><\/figure>\n\n\n\n<p>In the annual returns chart, aside from a significant downturn in 2022, the strategy achieved annualized returns exceeding 30% in the other three years.<\/p>\n\n\n\n<figure class=\"wp-block-image aligncenter size-full caption-align-center\"><img loading=\"lazy\" decoding=\"async\" width=\"1332\" height=\"422\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/exposure-4.png\" alt=\"F-score strategy\" class=\"wp-image-29415\" srcset=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/exposure-4.png 1332w, https:\/\/www.tejwin.com\/wp-content\/uploads\/exposure-4-300x95.png 300w, https:\/\/www.tejwin.com\/wp-content\/uploads\/exposure-4-1024x324.png 1024w, https:\/\/www.tejwin.com\/wp-content\/uploads\/exposure-4-150x48.png 150w, https:\/\/www.tejwin.com\/wp-content\/uploads\/exposure-4-768x243.png 768w\" sizes=\"(max-width: 1332px) 100vw, 1332px\" \/><figcaption class=\"wp-element-caption\">Long \/ Short Position Exposure Chart<\/figcaption><\/figure>\n\n\n\n<p>Furthermore, from the long\/short position exposure chart, we can see that setting the maximum leverage to 90% in <code>TargetPercentPipeAlgo <\/code>keeps the exposure stable around 0.9. This ensures that the <mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-cyan-blue-color\">F-score strategy retains some flexibility and is less affected by large fluctuations.<\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>This strategy takes <a href=\"https:\/\/www.chicagobooth.edu\/~\/media\/FE874EE65F624AAEBD0166B1974FD74D.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Joseph Piotroski&#8217;s ( 2002 )<\/a> paper as its foundation, aiming to explore whether the F-score strategy can provide stable profits for investors in the Taiwan stock market. In constructing the strategy, <span style=\"text-decoration: underline;\" class=\"ek-underline\">we identify undervalued stocks using the book-to-market ratio<\/span> and calculate the F-score and generate trading signals. Finally, we apply the simplified backtesting engine, TargetPercentPipeAlgo, to conduct strategy backtesting.<\/p>\n\n\n\n<p>The quarterly rebalancing feature of the F-score strategy allows investors to promptly update their portfolios after each quarter&#8217;s new financial data release. Performance analysis using Pyfolio further confirms <mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-cyan-blue-color\">the F-score strategy&#8217;s superior profitability compared to the broader market<\/mark>. This demonstrates that even after over 20 years since its introduction, the strategy retains robust capabilities in evaluating company profitability, safety, and growth potential. Moreover, it shows applicability within the context of the Taiwan stock market.<\/p>\n\n\n\n<p><strong>Please note that the strategy and target discussed in this article are for reference only and do not constitute any recommendation for specific commodities or investments<\/strong>. In the future, we will also introduce using the TEJ database to construct various indicators and backtest their performance. Therefore, we welcome readers interested in various trading strategies to consider purchasing relevant solutions from&nbsp;<a href=\"https:\/\/www.tejwin.com\/en\/solution\/quantitative-finance-solution\/\" class=\"ek-link\"><strong><mark style=\"background-color:#ffdf88\" class=\"has-inline-color\">Quantitative Finance Solution<\/mark><\/strong><\/a>. With our high-quality databases, you can construct a trading strategy that suits your needs.<\/p>\n\n\n\n<div class=\"wp-block-buttons is-layout-flex wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button has-custom-width wp-block-button__width-100 has-custom-font-size\" style=\"font-size:22px\"><a class=\"wp-block-button__link has-background wp-element-button\" href=\"https:\/\/www.tejwin.com\/en\/databank-solution\/financial-data\/\" style=\"border-radius:16px;background:linear-gradient(135deg,rgb(243,224,131) 0%,rgb(102,197,166) 50%,rgb(51,132,181) 100%)\"><strong>Access to Comprehensive Quantitative Data<\/strong><br><strong>Start Building Portfolios That Outperform the Market Today!<\/strong><\/a><\/div>\n<\/div>\n\n\n\n<div style=\"height:22px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p class=\"has-text-align-center\" style=\"font-size:32px\"><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-cyan-blue-color\"><strong><em>&#8220;Taiwan stock market data, TEJ collect it all.&#8221;<\/em><\/strong><\/mark><\/p>\n\n\n\n<p>The characteristics of the Taiwan stock market differ from those of other European and American markets. Especially in the first quarter of 2024, with the <strong><mark style=\"background-color:rgba(0, 0, 0, 0);color:#c05d5d\" class=\"has-inline-color\">Taiwan Stock Exchange reaching a new high of 20,000 points<\/mark><\/strong> due to the rise in TSMC&#8217;s stock price, global institutional investors are paying more attention to the performance of the Taiwan stock market.&nbsp;<\/p>\n\n\n\n<p><strong><mark style=\"background-color:rgba(0, 0, 0, 0);color:#0978b8\" class=\"has-inline-color\">Taiwan Economical Journal (TEJ)<\/mark><\/strong>, a financial database established in Taiwan for over 30 years, serves local financial institutions and academic institutions, and has long-term cooperation with internationally renowned data providers, providing high-quality financial data for five financial markets in Asia.&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong><mark style=\"background-color:#ebc766\" class=\"has-inline-color has-black-color\">Complete Coverage<\/mark><\/strong>: Includes all listed companies on stock markets in Taiwan, China, Hong Kong, Japan, Korea, etc.&nbsp;<\/li>\n\n\n\n<li><strong><mark style=\"background-color:#ebc766\" class=\"has-inline-color\">Comprehensive Analysis of Enterprises<\/mark><\/strong>: Operational aspects, financial aspects, securities market performance, ESG sustainability, etc.&nbsp;<\/li>\n\n\n\n<li><strong><mark style=\"background-color:#ebc766\" class=\"has-inline-color\">High-Quality Database<\/mark><\/strong>: TEJ data is cleaned, checked, enhanced, and integrated to ensure it meets the information needs of financial and market analysis.&nbsp;<\/li>\n<\/ul>\n\n\n\n<p>With TEJ&#8217;s assistance, you can access relevant information about major stock markets in Asia, such as securities market, financials data, enterprise operations, board of directors, sustainability data, etc., providing investors with timely and high-quality content. Additionally, TEJ offers advisory services to help solve problems in theoretical practice and financial management!<\/p>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-a89b3969 wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button has-custom-width wp-block-button__width-100 has-custom-font-size\" style=\"font-size:21px\"><a class=\"wp-block-button__link has-background has-text-align-center wp-element-button\" href=\"https:\/\/www.tejwin.com\/en\/contact\/\" style=\"border-radius:16px;background:linear-gradient(135deg,rgb(160,209,216) 0%,rgb(51,145,181) 50%,rgb(50,95,191) 100%)\"><strong>Want to Learn More About Our Databases and Solutions?<br>Contact Us and Get the Free Trial Today!<\/strong><\/a><\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Extended_Reading\"><\/span>Extended Reading<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/www.tejwin.com\/en\/insight\/buffetts-business-investment-rules\/\" class=\"ek-link\">TQuant Lab Warren E. Buffett&#8217;s Business Investment Rules<\/a><\/li>\n\n\n\n<li><a href=\"https:\/\/www.tejwin.com\/en\/insight\/trend-following-strategy\/\" class=\"ek-link\">Trend-Following Strategy: A Trading Method Used by Fund Managers<\/a><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Joseph Piotroski&#8217;s F-score strategy, based on evaluating 9 financial conditions, helps investors gain insights into a company&#8217;s profitability, safety, and growth potential. This article uses TQuant Lab to construct the F-score strategy, helping investors gain deeper insights into the investment benefits that the F-score can offer.<\/p>\n","protected":false},"featured_media":24498,"template":"","tags":[3063,3176,2990,3166,2537],"insight-category":[50,1356],"class_list":["post-24534","insight","type-insight","status-publish","has-post-thumbnail","hentry","tag-backtesting-2","tag-python-2","tag-quantitive-trading","tag-tquant-lab-2","tag-2537","insight-category-fintech","insight-category-tquant-lab-en"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/insight\/24534","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/insight"}],"about":[{"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/types\/insight"}],"version-history":[{"count":13,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/insight\/24534\/revisions"}],"predecessor-version":[{"id":29417,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/insight\/24534\/revisions\/29417"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/media\/24498"}],"wp:attachment":[{"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/media?parent=24534"}],"wp:term":[{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/tags?post=24534"},{"taxonomy":"insight-category","embeddable":true,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/insight-category?post=24534"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}