Intangible Value

66 Pages Posted: 31 Dec 2020 Last revised: 4 Aug 2021

See all articles by Andrea L. Eisfeldt

Andrea L. Eisfeldt

UCLA Anderson School of Management

Edward Kim

UCLA Anderson School of Management

Dimitris Papanikolaou

Northwestern University - Kellogg School of Management - Department of Finance; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: October 28, 2020

Abstract

Intangible assets are absent from traditional measures of value despite their growing importance in firms' capital stocks. We propose a simple improvement to the classic Fama and French (1992, 1993) value factor that incorporates intangibles and accounts for differences in accounting practices across industries. Our intangible value factor, HML^INT, prices assets as well as or better than the traditional value factor but yields substantially higher returns. This outperformance holds over the entire sample as well as in more recent decades in which value has underperformed. We show that the intangible value factor sorts more effectively within industries on productivity, profitability, financial soundness, and on other valuation ratios such as price-to-earnings.

Data and code can be downloaded here.

Keywords: Value investing, value factor, intangible assets, intangible capital

JEL Classification: G1, G10, G11, E22

Suggested Citation

Eisfeldt, Andrea L. and Kim, Edward and Papanikolaou, Dimitris, Intangible Value (October 28, 2020). Available at SSRN: https://ssrn.com/abstract=3720983 or http://dx.doi.org/10.2139/ssrn.3720983

Andrea L. Eisfeldt (Contact Author)

UCLA Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

HOME PAGE: http://https://sites.google.com/site/andrealeisfeldt/

Edward Kim

UCLA Anderson School of Management ( email )

United States

Dimitris Papanikolaou

Northwestern University - Kellogg School of Management - Department of Finance ( email )

Evanston, IL 60208
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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