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Book-to-Market Ratio

   Also found in: Wikipedia 0.01 sec.
Book-to-Market Ratio
A ratio of a publicly-traded company's book value to its market value. That is, the BTM is a comparison of a company's net asset value per share to its share price. This is a useful tool to help determine how the market prices a company relative to its actual worth. A ratio greater than one indicates an undervalued company, while a ratio less than one means a company is overvalued. Value managers seek out companies with high BTMs for their portfolios.


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The median (mean) book-to-market ratio for the sponsored spin-offs is also considerably higher than their parent firms' corresponding ratio of 0.
The variables of firm characteristics used for the investigation include the systematic risk ([beta]), book-to-market ratio (BM), market equity (ME), cash flow to price (C/P), earning to price (E/P) and sales growth rate (SG).
They ask whether it is possible to predict which firms will achieve high future growth using attributes such as past growth, industry affiliation (technology versus nontechnology), book-to-market ratio, past return, and security analysts' long-term forecasts.
 
 
 
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