The correct answer is D. B to M portfolio.
A book-to-market ratio (B/M ratio) is a valuation ratio that compares a company’s market value to its book value. The B/M ratio is calculated by dividing a company’s market capitalization by its book value per share. A high B/M ratio indicates that a company is undervalued, while a low B/M ratio indicates that a company is overvalued.
A B to M portfolio is a portfolio of stocks that have high B/M ratios. These stocks are often considered to be undervalued, and they may offer the potential for capital appreciation. However, it is important to note that B/M ratios are only one factor to consider when evaluating stocks. Other factors, such as a company’s financial health and growth prospects, should also be considered.
Here is a brief explanation of each option:
- A. H portfolio: This is not a standard term in finance. It could refer to a portfolio of stocks with high price-to-earnings ratios, but this would not be a good choice for a portfolio with the highest book-to-market ratios.
- B. L portfolio: This is also not a standard term in finance. It could refer to a portfolio of stocks with low price-to-earnings ratios, but this would not be a good choice for a portfolio with the highest book-to-market ratios.
- C. S portfolio: This is not a standard term in finance. It could refer to a portfolio of stocks with high sales growth rates, but this would not be a good choice for a portfolio with the highest book-to-market ratios.
- D. B to M portfolio: This is a standard term in finance that refers to a portfolio of stocks with high book-to-market ratios. This would be the best choice for a portfolio with the highest book-to-market ratios.