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Beneish M Score Short

Updated quarterlyData needs: lowshort onlylong short

1999

#96 beneish_m_score_short — Beneish 1999 FAJ 8-variable earnings-manipulation index.

In plain terms

Eight accounting red flags (sales receivables stretching faster than sales, margin compression, asset-quality drift, leverage jumps, accruals piling up) are combined into a single score. When the score crosses the manipulator threshold and the price chart already agrees, that's a short setup.

How it works

Beneish (1999, FAJ) built an 8-variable logistic-style index that flags firms likely to be manipulating earnings (DSRI, GMI, AQI, SGI, DEPI, SGAI, LVGI, TATA). M > -1.78 → manipulator suspect. Beneish-Lee-Nichols 2013 FAJ confirm OOS the score predicts both SEC enforcement actions and forward underperformance. Used inside AQR's quality-minus-junk composite. Short-bias only — long-side from very-negative M is historically noisy.

Live results

0 times picked on its own · 41 times inside a blend (33 beat the stock) · updated 2026-06-06

This strategy is a frequent ingredient in blends that combine a few strategies on one stock. It has contributed to 41 such blended picks (33 of which beat simply holding the stock). Picking it on its own is only one of the ways it shows up.

How its picks scored vs. buy & hold

Each pick is graded on a recent year it was never tuned on, against simply owning the same stock

Where its edge concentrates

Share of picks in each company-size group that beat buy & hold

How often it trades

Active vs. patient. Bars on the left mean it waits for rare setups; bars on the right mean it trades often

Return vs. buy & hold

How much each pick beat or trailed simply owning the stock over the test year (extreme microcap moves trimmed)

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Data dependencies

Fundamentals quarterly
Quarterly fundamentals (income, balance, cash-flow) from FMP + SEC.

Expected edge

Reported return: 76% true-positive on flagged manipulators (1982-1992); 2-5% ann. short alpha OOS
Tested over: 1982-1992 (in-sample); 1993-2012 OOS replications

Beneish 1999 in-sample: 76% of manipulators flagged with 17% false-positive; OOS trading returns 2-5% ann. short alpha

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