Empirical Value Measures Beyond Price-to-Book

Summary

The document asks what empirical research supports value measures other than price-to-book. It mentions sales-to-enterprise-value, cash-flow-to-enterprise-value, earnings-to-price, and forecast earnings-to-price as examples used by AQR, then points to a paper by Lettau and Wachter as a survey of evidence on alternative value measures. It directs readers to the paper’s first three tables for standard applications that overlap with those examples.

The material is a brief research pointer rather than a review of findings. It supplies no definitions, comparative returns, portfolio construction details, or caveats from the cited tables, so it cannot establish which valuation ratio performs best or under what conditions. A researcher would need to consult the cited paper and its underlying studies to assess measurement choices and empirical results. The central contribution here is identifying a literature source for broadening value research beyond book-based valuation.

Key ideas

• Value research can examine valuation ratios beyond price-to-book.
• Examples named include sales-to-enterprise-value, cash-flow-to-enterprise-value, earnings-to-price, and forecast earnings-to-price.
• Lettau and Wachter is recommended as a summary of empirical evidence on alternative value measures.
• The cited tables are suggested as a source for standard applications, but the document reports no comparative results.

Tags

# Value measures other than P/B


# Value measures other than P/B












Price-to-book is a very well-studied value measure. What research is there on non-P/B value measures?

I came across a handful used by AQR (Sales/EV, Cash flow/EV, E/P, Forecasted Earnings/Price) but the bibliography doesn't cite any other papers that study these measures.

## Answer by phdstudent (score 3, accepted)

https://quant.stackexchange.com/a/25023

I think a very good paper that summarizes the empirical evidence on other measures of value is the Lettau and Wachter (2007). Take a look at their tables 1, 2 and 3 for the most standard uses of value measures which indeed match with AQRs measures.

Below their table 1, just for completeness:

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.