Consistent Expectations B/P
factor.formula
Consensus expected book-to-market ratio (B/P) = Consensus expected net assets / current market value
in:
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It is obtained by weighted average of the forecast values of the company's net assets in future years by analysts of various institutions. The specific weighting method depends on the data provider, and common methods include:
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Use the arithmetic mean of the net worth forecasts from analysts at each institution. This is the simplest weighting method, giving all forecasts equal weight.
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A dual-weighting method of time and institution is used. Newer forecasts and forecasts from more reliable institutions are given higher weights. This method takes into account the timeliness of the forecast and the professional level of the analyst.
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The forecasts are weighted according to the accuracy of the analysts’ forecasts. Forecasts from analysts with higher forecast accuracy are given higher weights to improve the accuracy of the consensus expected net assets.
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The current total market value of a company, usually the total market value of outstanding shares, is calculated by multiplying the current stock price by the number of outstanding shares. You can also select total market value.
factor.explanation
The consensus book-to-market ratio factor measures the value level of a stock by comparing the consensus expected net assets with the current market value. A higher B/P ratio may indicate that the stock is undervalued, while a lower B/P ratio may indicate that it is overvalued. This factor uses analysts' expectations of the company's future fundamentals to capture possible pricing biases in the market. Different weighting methods will affect the value of the consensus expected net assets, thereby affecting the final performance of the factor.