Banks: A Short History Of Return On Equity, Book Value

Richard X. Bove, vice president of equity research financial sector at Rafferty, highlighted shifts in bank valuation methods. He explained that variables used to evaluate banks have shifted from earnings to tangible book value and most recently to return on equity. Bove also studied the relationship between price to book value and return on equity for banks. The correlation between both variables has become stronger after 2000. Banks considered included universal, regional, trust and Canadian.