PB"R"OE Model and the Factors Related with the Rise of Low P/B Stock Prices

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Other Title
  • PB"R"OEモデルとPBR1倍割れ銘柄の復活に関係する指標について
  • PB"R"OE モデル ト PBR 1バイワレ メイガラ ノ フッカツ ニ カンケイ スル シヒョウ ニツイテ

Description

This study presents the relationship between return on equity (ROE) and price-to-book ratio (PBR) using the PB"R"OE model. We collected stocks with a PBR below 1 and identified factors related to the rise of low PBR stock prices. Our analysis of the Nikkei225 using the PB"R"OE model shows that when ROE is over 8%, PBR is positively correlated with ROE. Empirical research on individual stocks indicates that the accrual factor is positively correlated with the future rise of PBR. However, with the exception of a few factors, most do not have a significant correlation with the rise in PBR. On the other hand, most of the factors that have a significant impact on PBR (especially growth and efficiency factors) are positively correlated with an increase in PBR. To increase PBR, companies should focus on improving these factors.

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