PT  - JOURNAL ARTICLE
AU  - Feifei Li
TI  - Intangibles: The Missing Ingredient in Book Value
AID  - 10.3905/jpm.2021.1.322
DP  - 2021 Dec 24
TA  - The Journal of Portfolio Management
PG  - jpm.2021.1.322
4099  - https://pm-research.com/content/early/2021/12/23/jpm.2021.1.322.short
4100  - https://pm-research.com/content/early/2021/12/23/jpm.2021.1.322.full
AB  - The author closely examines the impact of adding intangibles to traditional book equity as a more meaningful value measure. This intangibles-adjusted value metric subsumes the traditional book-to-price metric in explaining cross-sectional equity returns and improves value factor performance across subsample periods and geographic regions. The author finds that knowledge capital (capitalized research and development expenditures) plays a more important role than organization capital (capitalized partial selling, general, and administrative expenditures). The improved value premium comes from both the long and short sides of intangibles-adjusted HML, which is good news for investors under a long-only constraint and provides useful information for investors who choose to short or underweight certain names.