%0 Journal Article %A Clifford Asness %A Andrea Frazzini %T The Devil in HML’s Details %D 2013 %R 10.3905/jpm.2013.39.4.049 %J The Journal of Portfolio Management %P 49-68 %V 39 %N 4 %X In this article the authors challenge the standard method for measuring value that is used in academic work on factor pricing. The standard method uses lagged book data to calculate book-to-price (B/P) at portfolio formation. It aligns price data using the same lag, ignoring recent price movements. The authors propose two simple alternatives that use more timely price data; they then construct portfolios based on the different measures for a U.S. sample (from 1950 to 2011) and a global sample (from 1983 to 2011). They show that B/P ratios based on more timely prices better forecast true, unobservable B/P ratios at fiscal year-end. Value portfolios based on the timeliest measures earn statistically significant alphas, ranging between 305 and 378 basis points per year, versus the standard methods.TOPICS: Portfolio construction, statistical methods, accounting and ratio analysis %U https://jpm.pm-research.com/content/iijpormgmt/39/4/49.full.pdf