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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:

a) True
b) False

User Dialex
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1 Answer

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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.

User EricMorentin
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