Here's the image from the Allan Roth article:
![Image]()
What I can't understand is how the "original" style box was ever exactly 1/3rds unless they changed methodologies once before and are now changing back.
Unless there is a perfect inverse correlation between the book value of a company and its price/book ratio (which implies that all companies have exactly equal market cap regardless of intrinsic or enterprise value), you would always expect the 50% of companies with the highest P/B ratios to constitute more than 50% of total market cap.
What I can't understand is how the "original" style box was ever exactly 1/3rds unless they changed methodologies once before and are now changing back.
Unless there is a perfect inverse correlation between the book value of a company and its price/book ratio (which implies that all companies have exactly equal market cap regardless of intrinsic or enterprise value), you would always expect the 50% of companies with the highest P/B ratios to constitute more than 50% of total market cap.
Statistics: Posted by Walkure — Wed Jul 24, 2024 12:02 pm — Replies 54 — Views 2607