Price-to-Book in Sweden: The Best Sharpe Ratio of 18 Exchanges

We ran the same P/B screen across 18 exchanges globally. Sweden came back with the best risk-adjusted results of the group: 11.93% CAGR, Sharpe ratio of 0.447, and a down capture of 51.56%. Returns are in SEK.

Contents

1. Method
2. What Research Shows
3. The Screen
4. Backtest Results
5. The Asymmetry
6. When It Works
7. When It Fails
8. The Currency Note
9. Full Annual Returns
10. Limitations
11. Run It Yourself
12. Part of a Series
13. References

That last number is the one worth understanding. When the S&P 500 fell, this portfolio fell about half as much on average. When the S&P 500 rose, it captured 124% of the gain. That asymmetry, over 25 years, produces a compounding machine.

Method

• Data source: Ceta Research (FMP financial data warehouse)
• Universe: Stockholm Stock Exchange (STO), market cap above exchange threshold
• Signal: P/B 0–1.5, ROE > 8% (from financial_ratios FY + key_metrics FY)
• Period: 2000–2025 (25 annual rebalance periods)
• Rebalancing: Annual (January), equal weight top 30 by lowest P/B
• Benchmark: S&P 500 Total Return (SPY, USD), for comparison
• Cash rule: Hold cash if fewer than 10 stocks qualify
• Transaction costs: Size-tiered model (0.1% mega-cap to 0.5% mid-cap)
• Currency: Returns in SEK (local currency)

Historical financial data with 45-day lag to prevent look-ahead bias. Full methodology: backtests/METHODOLOGY.md

What Research Shows

The P/B premium in Nordic markets has been more durable than in the US. Several structural factors explain why.

Swedish listed companies are disproportionately industrials, financials, and materials, sectors where physical assets appear on the balance sheet at meaningful values. Volvo, SKF, Sandvik, Handelsbanken. These aren't intangible-asset businesses. Book value measures something real when the company's core assets are machinery, property, and loan books.

The Fama-French (1992) three-factor model documented the HML premium globally, including European markets. Subsequent research confirmed the pattern persisted across Nordic exchanges through the 2000s. Unlike the US, where the dominance of asset-light technology companies eroded the signal, Sweden's industrial composition kept book value relevant as a screening metric.

There's also a behavioral component. The Stockholm exchange has a more concentrated institutional investor base than US markets. Sentiment-driven mispricings in individual industrial and financial stocks can persist longer before correcting.

The Screen

This query finds STO-listed stocks trading below 1.5x book value with ROE above 8%.

SELECT
 k.symbol,
 p.companyName,
 ROUND(k.priceToBookRatioTTM, 3) AS pb_ratio,
 ROUND(k.returnOnEquityTTM * 100, 1) AS roe_pct,
 ROUND(k.marketCap / 1e9, 2) AS mktcap_b
FROM key_metrics_ttm k
JOIN profile p ON k.symbol = p.symbol
WHERE k.priceToBookRatioTTM > 0
 AND k.priceToBookRatioTTM < 1.5
 AND k.returnOnEquityTTM > 0.08
 AND k.marketCap > 1000000000
 AND p.exchange = 'STO'
ORDER BY k.priceToBookRatioTTM ASC
LIMIT 30

Run this screen live →

The ROE filter is essential. Sweden has a significant number of holding companies and conglomerates with large balance sheets and modest returns on them. P/B alone would catch those. ROE > 8% selects for companies actively compounding equity at a reasonable rate.

Backtest Results

A $10,000 investment in January 2000 grew substantially more than the SPY equivalent over the same period.

The Sharpe of 0.447 vs SPY's 0.322 means more return per unit of risk. The max drawdown of -39.80% is deeper than SPY's -34.90% in absolute terms, but the down capture of 51.56% means the path there was smoother in the typical down year. 2008 was the exception.

The Asymmetry

The combination of 124.19% up capture and 51.56% down capture is what makes this result unusual. Most strategies face a tradeoff: either you capture more of the upside (higher beta, more volatility) or you protect on the downside (lower beta, less upside). This screen does both simultaneously over the full period.

Why? P/B screens in Sweden select heavily toward Financials and Industrials at cheap prices relative to their book value. In a recovering or growing economy, those businesses compound equity well. In a crisis, they fall hard initially, but the sector composition (banks, insurers, manufacturers) recovers faster than sentiment-driven growth stocks.

The 2000-2001 cash periods helped too. No qualifying stocks in the early years meant the portfolio sat in cash while global markets fell.

When It Works

2005–2006: +37.24% and +31.49% vs +7.17% and +13.65% for SPY. Sweden's industrial and financial sectors were in a strong cycle. Low P/B selection found the companies with the most compressed valuations relative to assets.

2009: +52.1% vs +24.73% for SPY. Post-crisis bounce. Cheap industrial and financial stocks with intact balance sheets recovered sharply.

2015: +17.26% vs -0.12% for SPY. This was a significant year globally for value vs growth divergence. Sweden's P/B screen captured the outperformance while US P/B screens struggled with the same macro environment.

2018–2019: +2.84% vs -5.15% in 2018, then +46.89% vs +32.31% in 2019. Held up in the down year, then surged in the recovery. The 2019 number is one of the best single-year figures in the dataset.

When It Fails

2004: +1.28% vs +10.24% for SPY (-9.0pp). The portfolio underperformed even with positive returns.

2008: -36.05% vs -34.31% for SPY (-1.7pp). Almost matched the crash. Swedish industrials and banks got hit hard. The down capture of 51.56% is an average; in 2008 specifically, the protection didn't materialize.

2011: -19.81% vs +2.46% for SPY (-22.3pp). European sovereign debt fears hit financials across the continent, and Sweden's portfolio was concentrated there.

2024: +10.74% vs +25.28% for SPY (-14.5pp). The US mega-cap technology dominance that plagued all value screens globally showed up here too. SPY's gains were concentrated in companies that P/B screens will never hold.

The Currency Note

Returns here are in SEK. If you're a USD-based investor, the actual returns depend on SEK/USD exchange rates over the period. SEK weakened against USD in several stretches. The local returns are what a Swedish investor would experience. For an international investor, add currency risk (or hedge it).

This is relevant for any non-USD backtest. The performance figures represent the strategy's alpha in its local market, independent of currency moves.

Full Annual Returns

19 of 25 years beat SPY. Including the two cash years (2000, 2001) where the portfolio avoided the crash entirely.

Limitations

Currency risk is real. SEK/USD moves affect USD-based investors. The backtest doesn't include currency hedging costs.

Market cap threshold. The exchange-specific market cap threshold excludes small-caps. Sweden has a large and active small-cap segment. The results here reflect mid-to-large cap stocks only.

The 2011 drawdown. A -22.3pp underperformance in a single year is significant. It came from European sovereign debt contagion hitting Swedish financials. Any portfolio concentrated in European financials is exposed to this risk.

Down capture is an average. 51.56% down capture is the mean across all down years. In 2008 and 2011, the portfolio didn't show the same defensive character. The average is real, but it masks tail risk in financial/geopolitical crises.

SPY benchmark comparison. SPY is a USD-denominated US equity benchmark. Comparing a SEK-denominated Swedish portfolio to it conflates market alpha with currency and regional effects. The excess return reflects strategy performance, but also Sweden vs US market performance over the period.

Part of a Series: Global | US | Canada | Brazil

Run It Yourself

git clone https://github.com/ceta-research/backtests.git
cd backtests

# Sweden backtest
python3 price-to-book/backtest.py --preset sweden --output results.json --verbose

# All exchanges
python3 price-to-book/backtest.py --global --output results/exchange_comparison.json

# Current screen
python3 price-to-book/screen.py --preset sweden

Part of a Series

This is the Sweden analysis. We ran the same screen across 18 exchanges globally:

• US analysis → The market where the P/B premium has nearly vanished. 7.50% CAGR, -0.15% excess.
• Canada analysis → Resource-heavy market, 8.02% down capture, +48pp in 2022.
• Brazil analysis → Highest absolute alpha (+8.47%). Emerging market where the premium still holds.
• Global comparison → All 18 exchanges. Only 4 beat SPY.

References

• Fama, E. & French, K. (1992). "The Cross-Section of Expected Stock Returns." Journal of Finance, 47(2), 427–465.
• Rosenberg, B., Reid, K. & Lanstein, R. (1985). "Persuasive Evidence of Market Inefficiency." Journal of Portfolio Management, 11(3), 9–16.
• Lakonishok, J., Shleifer, A. & Vishny, R. (1994). "Contrarian Investment, Extrapolation, and Risk." Journal of Finance, 49(5), 1541–1578.
• Gray, W. & Vogel, J. (2012). "Analyzing Valuation Measures: A Performance Horse-Race over the Past 40 Years." Journal of Portfolio Management, 39(1), 112–121.
• Novy-Marx, R. (2013). "The Other Side of Value: The Gross Profitability Premium." Journal of Financial Economics, 108(1), 1–28.

Run It Yourself

Explore the data behind this analysis on Ceta Research. Query our financial data warehouse with SQL, build custom screens, and run your own backtests across 70,000+ stocks on 20 exchanges.

Data: Ceta Research (FMP financial data warehouse), 2000–2025. Universe: Stockholm Stock Exchange (STO). Returns in SEK. Full methodology: METHODOLOGY.md. Past performance doesn't guarantee future results.