[amp_mcq option1=”book to market ratio” option2=”market to book ratio” option3=”company to industry ratio” option4=”stock to portfolio ratio” correct=”option2″]<\/p>\n
The correct answer is: B. market to book ratio<\/strong><\/p>\n The Fama-French three-factor model is a model that describes the cross-section of stock returns in the United States. The model states that the excess return of a stock can be explained by three factors: market risk, size risk, and value risk.<\/p>\n The market risk premium is the additional return that investors demand for holding risky assets over risk-free assets. The size risk premium is the additional return that investors demand for holding small-cap stocks over large-cap stocks. The value risk premium is the additional return that investors demand for holding stocks with low book-to-market ratios over stocks with high book-to-market ratios.<\/p>\n The market-to-book ratio is a measure of a company’s valuation. It is calculated by dividing the market value of a company’s equity by its book value. A high market-to-book ratio indicates that investors believe that the company is worth more than its book value. A low market-to-book ratio indicates that investors believe that the company is worth less than its book value.<\/p>\n The market-to-book ratio is a useful tool for investors to use when evaluating stocks. However, it is important to remember that the market-to-book ratio is only one factor to consider when making investment decisions. Other factors, such as a company’s earnings growth rate and profitability, should also be considered.<\/p>\n The other options are incorrect because they are not measures of valuation. The book-to-market ratio is a measure of a company’s financial health. The company-to-industry ratio is a measure of a company’s size relative to its industry. The stock-to-portfolio ratio is a measure of a stock’s volatility relative to its portfolio.<\/p>\n","protected":false},"excerpt":{"rendered":" [amp_mcq option1=”book to market ratio” option2=”market to book ratio” option3=”company to industry ratio” option4=”stock to portfolio ratio” correct=”option2″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[945],"tags":[],"class_list":["post-52256","post","type-post","status-publish","format-standard","hentry","category-financial-management","no-featured-image-padding"],"yoast_head":"\n