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In the next section, I look at stock returns for companies in different price to book deciles, in a simplistic assessment of the value premium. With both the size and value premiums, I will extend my assessment over time to see how (and why) these premiums have changed, with lessons for analysts and investors.
With these characteristics, the accounting balance sheets for these companies will be identical right after they start up, and the bookvalue of equity will be $60 million in each company. The first is that if markets are efficient, the price to book ratios will reflect the quality of these companies.
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