PT  - JOURNAL ARTICLE
AU  - Clifford Asness
AU  - Andrea Frazzini
TI  - The Devil in HML’s Details
AID  - 10.3905/jpm.2013.39.4.049
DP  - 2013 Jul 31
TA  - The Journal of Portfolio Management
PG  - 49--68
VI  - 39
IP  - 4
4099  - https://pm-research.com/content/39/4/49.short
4100  - https://pm-research.com/content/39/4/49.full
AB  - 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