The Price/Book ratio has probably been the most important valuation ratio of the past century. If you look at the academic research that supports value investing, you won’t find any other ratio that is referenced more often. There is also no ratio that is used more by systematic value funds. But the rise on intangible assets and other factors have led many to question whether the ratio has value any more. , we look at the arguments for and against the Price/Book and whether it should still have a place in value portfolios.
In this episode, we discuss:
- The weaknesses of using Price/Book;
- The use of a value composite as an alternative value factor;
- Why we’d need a lot more time to call the final death knell on the Price/Book ratio.
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- Jack’s article
- Newfound Research’s Factor Fimbulwinter