An Updated Model of Price-to-Book

21 Pages Posted: 31 Oct 2015

See all articles by Ben S. Branch

Ben S. Branch

University of Massachusetts Amherst - Isenberg School of Management

Anurag Sharma

University of Massachusetts Amherst - Isenberg School of Management

Chetan Chawla

North Central College

Feng Tu

Independent

Date Written: 2014

Abstract

The price-to-book (PB) ratio is a measure of the relative value that the market places on a share of stock. We have estimated an empirical equation of two stages that explain about 62% of the variation in annual PB levels for the S&P 500 companies from the year 2000 to 2009. We explored the market’s ability to anticipate changes in performance and found that the market price appears to reflect anticipatory information not present in the model value. This paper both advances understanding of PB’s determinants and provides a tool for managers who wish to enhance their firm’s PB.

Suggested Citation

Branch, Ben S. and Sharma, Anurag and Chawla, Chetan and Tu, Feng, An Updated Model of Price-to-Book (2014). Journal of Applied Finance (Formerly Financial Practice and Education), Vol. 24, No. 1, 2014, Available at SSRN: https://ssrn.com/abstract=2682606

Ben S. Branch (Contact Author)

University of Massachusetts Amherst - Isenberg School of Management ( email )

Room 201A
Amherst, MA 01003-4910
United States
413-545-5690 (Phone)
413-545-3858 (Fax)

Anurag Sharma

University of Massachusetts Amherst - Isenberg School of Management ( email )

Amherst, MA 01003-4910
United States

Chetan Chawla

North Central College ( email )

30 North Brainard Street
North Central College
Naperville, IL 60540
United States

HOME PAGE: http://https://www.northcentralcollege.edu/profile/cchawla

Feng Tu

Independent ( email )

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