Computerized stock screening rules for portfolio selection Steven C. Gold*, Paul Lebowitz Department of Finance, Accounting and MIS, Rochester Insitiute of Technology, College of Business, Max Lowenthal Bldg., 1 Lomb Memorial Drive, Rochester, NY 14623, USA Abstract Recent studies have uncovered several systematic patterns that increase the probability that individual investors can select stock portfolios with excess returns. This study tests the feasibility of using a commercially available computerized stock screening program for investors to take advantage of these patterns. The screening program searches the three major exchanges and selects stocks on both fundamental and technical indicators: low price-to-sales ratio, small firm size, accelerating stock prices above their 50 day moving average, high trading volume, and high earnings growth. Of the 18 models tested between 1994 and 1998, those that allow for selection between exchanges yield portfolio returns that significantly exceed the average market indices. © 1999 Elsevier Science Inc. All rights reserved. 1. Introduction Stock screening programs, similar to the ones used by professional portfolio managers, are becoming available on the Internet at little or no cost to the individual investor. Anderson (1998), in an article “Screening for investment gold,” overviews four such sites with relatively sophisticated programs. Stock screening programs make it easier and quicker to tailor a portfolio to fit the desired style and preferences of the investor. Styles may range from investing for value to growth. But whatever the style, the goal is to develop a screening program to find systematic patterns that will increase the performance of a portfolio. This paper investigates the use of one highly ranked investor-screening platform from Telescan, an easy-to-use software package that provides nearly 300 screening variables that cover both fundamental and technical indicators. The user can customize a model to include * Corresponding author. Tel.: +1-716-475-2318; fax: +1-716-475-6920. E-mail address: scgbbu@rit.edu (S.C. Gold) Financial Services Review 8 (1999) 61–70 1057-0810/99/$ – see front matter © 1999 Elsevier Science Inc. All rights reserved. PII: S1057-0810(99)00032-3