Quality#97tier 1live in productionNew

`beneish m score short`

cadence: Quarterlydata: lowshort onlylong short

1999

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

What it checks

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.

Mechanism

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.

No production champion data for this family yet. Stats appear once the discovery pipeline promotes at least one strategy with this family tag.

Signal rule

Beneish 8-component M-score on TTM/YoY fundamentals; short when M > -1.78 (or stricter -1.49) AND own-name 60d downtrend.

Data dependencies

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

Expected edge

Paper alpha: 76% true-positive on flagged manipulators (1982-1992); 2-5% ann. short alpha OOS
Paper window: 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

Related families

sloan accrualsAccounting

Earnings persistence is much lower in firms with high accruals. Going long low-accrual and short high-accrual delivers ~10% annualized over 1962-1991 (Sloan 1996, Accounting Review). Richardson-Sloan-Soliman-Tuna (2005, JAE) refined the measure to a broader balance-sheet accrual definition. Status (2024 replication consensus): alive in small caps, faded in large caps post-2003.

piotroski f scoreQuality

Piotroski (2000, JAR) showed that a 9-signal accounting score distinguishes winners from losers within the high-B/M (value) universe. Long F>=7 / avoid F<=2 added ~7.5% annualized over 1976-1996 inside the value tertile, and ~23% in the highest B/M decile. Modern replications through 2021 confirm the score still differentiates forward returns even without the value gate; works especially well in uncertainty regimes when low-quality distressed names are marked down faster.

qmjQuality

Quality-Momentum (Asness-Frazzini-Pedersen 2019 QMJ): combine quality (gross profit / assets, ROE) with momentum — long when both are in their respective top buckets relative to their own history. The canonical cross-sectional implementation would rank across the universe; we approximate with self-relative quintiles, with fundamentals available-date lagged 45d to respect filing latency.

lazy prices shortEvent

Firms rewriting 10-K sections year-on-year signal regime change. Cohen et al. find shorting 'changers' yields up to 188bps/month — the asymmetry is strong: most alpha lives in the SHORT leg. Adds section-resolved diff (Item 1A risk-factors, Item 7 MD&A) over whole-document cosine.

Explore `beneish m score short` on alphactor.ai

See which tickers this family is currently firing on, with live signals and rankings.

Open universe with this filter →Browse all 100 families

beneish m score short