Price-to-Book Ratio
Price-to-book is market cap divided by book equity — what the market pays per unit of accounting residual.
Definition
Price-to-Book Ratio refers to to-book is market cap divided by book equity — what the market pays per unit of accounting residual. Keep that definition fixed when comparing series, managers, or regimes — renaming the same tape does not create a new signal.
Why it matters
Equity risk premia compress or expand with earnings paths and factor regimes. When to-book is market cap divided by book equity — what the market pays per unit of accounting residual shifts, related hedges, limits, and narratives usually need an explicit update rather than a quiet assumption.
Case
Suppose a desk is positioned for the opposite of what price-to-book ratio is saying. If to-book is market cap divided by book equity — what the market pays per unit of accounting residual moves against that book, the first question is not “is the story clever?” but whether size, hedges, and stop logic still match the observation.
How to read it
Separate index beta from residual; know the sector and factor loadings of the claim. Prefer a short written null hypothesis for Price-to-Book Ratio: what would falsify the current reading in the next window?