Is It a Good Measure?

Bank stocks are notorious for trading at prices below book value per share, even when a bank’s revenue and earnings are on the rise. As banks grow larger and expand into nontraditional financial activities, especially trading, their risk profiles become multidimensional and more difficult to construct. This increases business and investment uncertainties.

This is presumably the main reason why bank stocks tend to be conservatively valued by investors who must be concerned about a bank’s…