Agnostic Fundamental Analysis via Machine Learning

ABSTRACT We construct stock mispricing signals by estimating fair values from financial statements using machine learning, minimizing data‐snooping bias. Signals derived from boosted regression trees and neural networks predict future stock returns and outperform linear benchmarks. We demonstrate that machine learning‐based signals capture nonlinear relationships between financial variables and firm values, providing incremental information beyond existing mispricing factors. This advantage improves valuation performance, particularly during volatile periods and for small firms. Our findings lend support to the validity of fundamental analysis and contribute to the growing literature on machine learning in finance.

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Publication Details

Journal
Accounting and Finance
Published
2025-03-24
DOI
https://doi.org/10.1111/acfi.70013
Primary Topic
Financial Markets and Investment Strategies
Type
article
Field-Weighted Citation Impact
0.00

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article

Agnostic Fundamental Analysis via Machine Learning

Bin Li, Zhen Hai Long
Accounting and Finance
Financial Markets and Investment Strategies
article

Agnostic Fundamental Analysis via Machine Learning

Bin Li, Zhen Hai Long
article en

Abstract

ABSTRACT We construct stock mispricing signals by estimating fair values from financial statements using machine learning, minimizing data‐snooping bias. Signals derived from boosted regression trees and neural networks predict future stock returns and outperform linear benchmarks. We demonstrate that machine learning‐based signals capture nonlinear relationships between financial variables and firm values, providing incremental information beyond existing mispricing factors. This advantage improves valuation performance, particularly during volatile periods and for small firms. Our findings lend support to the validity of fundamental analysis and contribute to the growing literature on machine learning in finance.

Accounting and FinanceVol. 65(3)
Zhongnan University of Economics and Law (CN), Wuhan University (CN)
National Natural Science Foundation of China
Openalex Percentile: Top 92%
Financial Markets and Investment Strategies
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Agnostic Fundamental Analysis via Machine Learning — Bin Li, Zhen Hai Long · Accounting and Finance (2025) | TGRS Research Map | TGRS