To determine whether that is a plausible reason in the Brazilian market, the companies were divided in two groups according to their book-to-market ratios
. Undervaluation is more likely to be a reason for high book-to-market companies (value companies) to repurchase.
Regarding the book-to-market ratio
, we observe that funds capture the value premium with their VM trades, as they generally buy stocks with high book-to-market ratios
and sell stocks with low ratios.
To examine factors influencing and constraining the decision to recognize zero goodwill impairment, this study selected firms that encountered book-to-market ratios
above one for three consecutive years.
Fama and French (1998) conducted a study on the returns yielded by high book-to-market ratios
and low book-to-market ratios
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
Schall, "Book-to-Market Ratios
as Predictors of Market Returns," Journal of Financial Economics, 49, no.
In order to focus attention on the difference between beta coefficients rather than differences in market capitalization and book-to-market ratios
, we used the average values of market capitalization (ME) and the book-to-market ratio
(BE/ME) for property-liability insurers for all cost of capital estimates shown in Table 5.
We find that pro forma announcers tend to be relatively "young" firms that are concentrated primarily in the tech sector and business services industries, and that they are significantly less profitable, more liquid, and have higher debt levels, P-E ratios, and book-to-market ratios
than other firms in their own industries.
We also address a second question: Are accounting earnings-based risk measures incrementally associated with the market's assessment and pricing of equity risk beyond other observable risk factors, such as the three factors in the Fama and French (1992) model (market model beta, firm size, and book-to-market ratios
First, we subdivide the sample into groups based on: 1) their book-to-market ratios
(B/MV), 2) the level of Tobin's Q, and 3) their magnitudes of free cash flow.
The authors also show that glamour winners -- positive surprise firms with a sequence of past positive earnings surprises, higher past trading volume, and low book-to-market ratios
-- exhibit faster price reversals.
Can one use insider trading data along with information on P/E ratios, book-to-market ratios
, momentum, or dividend yields to improve investment results?