Final answer:
Stocks with below-average price-to-earnings and market-to-book ratios and above-average dividend yields have consistently outperformed growth stocks over long periods of time.
Step-by-step explanation:
The statement is true. Stocks with below-average price-to-earnings and market-to-book ratios and above-average dividend yields have consistently outperformed growth stocks over long periods of time.
The price-to-earnings ratio is calculated by dividing the stock price by the earnings per share. Stocks with a below-average price-to-earnings ratio are considered undervalued, indicating that the stock price is lower relative to the earnings it generates.
The market-to-book ratio compares the market value of a company to its book value. Stocks with a below-average market-to-book ratio suggest that they are trading at a lower price compared to their underlying book value.
Dividend yield measures the annual dividend payment relative to the stock price. Stocks with an above-average dividend yield indicate that they pay a higher dividend compared to their stock price.
When stocks have these characteristics (below-average price-to-earnings and market-to-book ratios and above-average dividend yields), it suggests that the stock may be undervalued and have better potential for long-term returns compared to growth stocks. Therefore, the statement is true.