New advanced ratio: Beneish M-Score

Latest Release
1

Dear All,

Under FUNDAMENTALS->ADVANCED you will now find the Beneish M-Score and all it’s components. We will finish adding the documentation for each component tomorrow. The main things to keep in mind for P123’s version for the M-Score are:

  • During preliminary reporting (when many N/A’s are present) we may use our fallback mechanism. Each M-Score component is evaluated independently, but if the fallback is necessary it is applied to each factor in the formula.

  • Our DEPI implementation by default uses Depreciation & Amortization (see MScoreDEPAMI), while Beneish original paper uses Depreciation (see MScoreDEPI). It is unclear to us how he did that because Depreciation is only available in Compustat in annual statements and only starting about 2001 from what we can tell.

Let us know of any question

NOTE: Beneish M-Score famously flagged Enron as a “manipulator”. Try using these rules in the Screen Backtest and you would have made money with Enron from 1/2/1999 - 1/1/2004

Ticker(“ENRNQ^04”)
BeneishMScore < -1.78

2

You’re on fire these days. Thanks.

Seriously no one will blame you for taking a holiday !

3

Thank you for this addition

Scott

4

Checking a number of financial stocks, I find that the Beneish M-Score is missing for all of them. This seems to be due to the components MScoreAQI and MScoreLVGI missing. Is this a bug or expected behavior? I read through the available docs and don’t see an obvious reason as to why Financials would be excluded from the calculation. The following image may illustrate the issue.

Thanks,
Matt
.

5

Having done a little more research, I want to amend my previous post: There are a few financials for which the Beneish M Score exists. The following stats show the current availability of a valid M Score within the “US Fundamentals” universe:
Financials: 104 of 1,328 (8%)
Banks: 4 of 652 (< 1%)
Diversified fin’ls: 49 of 231 (21%)
Insurance: 10 of 139 (7%)
Real Estate: 41 of 306 (13%)
non-Financials: 3,918 of 5,305 (74%)

So, coverage of the Beneish M Score among financials seems extraordinarily low, even though overall coverage is already not optimal. By comparison, the Piotroski F Score achieves about 95% coverage on the same universe and doesn’t seem to be missing more often for financials.

6

Beneish excluded financial companies, so they shouldn’t show up.

http://ycharts.com/glossary/terms/beneish_m_score

Steve

7

Benesih needs CurAst & CurLiab which are almost always NA in sector=FINANCIAL.

8

Steve and Marco,

Thanks for your help. I guess there’s nothing to be done about the coverage.

Best Regards,
Matt

9

Beneish’s o-score is a more valuable indicator for short ideas according to the research. Will you be building out a method for searching for o-score stocks so users can backtest that system? Thanks! http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1134818