Book-to-Market Ratio

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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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Fama and French (1992)--hereafter F&F--and Jegadeesh and Titman (1993) convincingly summarized the evidence that "diversifiable" individual characteristics, like book-to-market, size and momentum, could capture important cross-sectional variation in average stock returns.
I study the influence of takeover activity on common factors, size and book-to-market.
In any event, assuming these two value approaches imply very different portfolios, the Research Affiliates paper tests a Eugene Portfolio that is long risky stocks and short safe stocks, but which is indifferent to book-to-market ratios.
The value coefficient is positive for all high book-to-market portfolios.
No modelo de multifatores de Fama e French (1996), que sera utilizado aqui, as carteiras sao formadas a partir de duas variaveis contabeis: tamanho da empresa e seu book-to-market.
Gerard Hoberg, University of Maryland, and Ivo Welch, Brown University and NBER, "Better Factor Portfolios and Pricing Book-to-Market Characteristics with the Fama-French Factor Model"
In general institutional lenders perceive small and high book-to-market borrowers as systematically riskier than larger borrowers with low book-to-market ratios, consistent with the asset pricing approach in Fama and French (1993).
In order to identify the major risk factors in pricing industrial stocks, this study estimates different models based on six explanatory factors: the overall stock market, size, book-to-market equity ratio, the term structure, default risk, and the unsecuritized real estate market.
And when the field of companies is reduced to just those with a low book-to-market ratio, those companies outperformed their peers by 45 percent in four years, said David Ikenberry, a finance professor at Rice University in Texas and co-author of ``Market Underreaction To Open Market Share Repurchases.
Other studies have shown book-to-market equity (Rosenberg, Reid and Lanstein, 1985; Fama and French 1992) and the cash flow/price ratio (Chan, Hamao and Lakonishok, 1991) to have predictive ability for stock returns.
Os autores concluiram que o CAPM na sua forma condicional nao apresentou ganho significativo na explicacao das carteiras baseadas na anomalias tamanho, book-to-market e momento em relacao a forma estatica.
There is abundant research documenting the robustness of book-to-market values of equity in explaining stock returns.