All FirmsTechnology Firms
Standard error0.17 0.25
Median 1.70 1.66
Skewness 20.11 9.92
Range 234.24 60.43
Minimum 0.00 0.34
Maximum 234.24 60.09
Count 2,178.00 279.00
Largest (100) 6.15 2.03
Smallest (100)0.57 1.33Price-to-Book Ratio
Themarketvalueoftheequityinafirmreflectsthemarket’s
expectationsofthefirm’searningpowerandcashflows.The
bookvalueofequityisthedifferencebetweenthebookvalue
ofassetsandthebookvalueofliabilities,anumberthatis
largely determined by accounting conventions. The
price-to-bookratioiscomputedbydividingthemarketvalue
of equity by the current book value of equity:
Togetasenseofwhatcomprisesahigh,low,oraverageprice
to book valueratio, wecomputed theratio for everyfirm
listed in the United States. Figure 8.4 summarizes the
distributionofprice-to-bookratiosinJanuary2006.Notethat
thisdistributionisheavilyskewed,asisevidencedbythefact
that theaverage price-to-book value ratio of firms is 5.33
whilethemedianprice-to-bookratioismuchlowerat2.32.