Stattman (1980) and Rosenberg, Reid, and Lanstein (1985) are the pioneer researchers who document the relationship between expected returns and book-to-market ratio
is the ratio of the book value of equity to the market value of equity.
We conclude that a model, which incorporates market factor, firm size, book-to-market ratio
, earnings-to-price ratio and liquidity, provides a good description of the variation in stock returns compared to the competing models.
al (2004) find that US firms opting for rights offers tend to have a higher book-to-market ratio
, a higher return on assets, a higher current ratio, and a lower level of debt.
The F-score originally was developed for firms with high book-to-market ratio
Thus, financial companies were excluded from the sample, because, according to Fama and French (1992), their high indebtedness can distort the book-to-market ratio
, and it does not mean the same as non-financial companies' high indebtedness.
Fama and French (1992) confirmed that size and book-to-market ratio
could capture the cross-sectional stock returns together with [beta], leverage, and earnings-price ratios.
16023), co-authors Jules van Binsbergen, John Graham, and Jie Yang use a financial model to estimate the marginal cost curve for corporate debt, including in their model such financial characteristics as asset collateral, firm size, book-to-market ratio
, asset tangibility, cash flow, and dividend payouts.
Our regression model includes variables like, whether stock is in the option category or not, the market capitalisation of the firm, book-to-market ratio
, average trading volume, promoters' stock holdings and total institutional holdings.
the S&P 500), an equally weighted market index, a portfolio with the same size and a portfolio with the same size and book-to-market ratio
However, the book-to-market ratio
(BOOKMKT) of our sample firms is significantly higher than the median book-to-market ratio
of the industry suggesting pro forma firms are relatively undervalued.
B/M = beginning of the year book-to-market ratio
(9704); book value is measured as total common equity; market value is the close price multiplied by the number of common shares outstanding; observations with negative book-to-market ratio