Regressingtheprice-to-bookratioagainstreturnonequityfor
U.S. banks, we obtain the following:
This regression can be used to estimate predicted
price-to-book ratios for the banks in the sample in the
following table:
The most undervalued firm in the group is Popular Inc.,
tradingalmost30%belowitspredictedvalue.StateStreetis
themostovervaluedbankinthegroup,trading33.41%above
its predicted value.