The Recent Downfall of Value Investing - A Study on the Performances of the Magic Formula and the F-Score in the Nordic Market

Abstract: We have examined if value investing has generated above-market returns and possessed the ability to predict future returns using fundamental analysis in the Nordic market. To address our research question, we have conducted univariate analyses testing the performances of Greenblatt's Magic Formula and Piotroski's F-Score against the MSCI Nordic Countries Net Total Return Index and their respective inverse portfolios. The inverse portfolios were designed using the opposite methodology of the original portfolios and should thus identify stocks predicted to generate below-market returns. Our findings suggests that during the first decade of the 21st century, value investing generated superior returns compared the market. However, in the recent decade the strategies outperformed neither the market nor their inverse portfolios on any significant level.