TY - JOUR T1 - Intangibles: The Missing Ingredient in Book Value JF - The Journal of Portfolio Management DO - 10.3905/jpm.2021.1.322 SP - jpm.2021.1.322 AU - Feifei Li Y1 - 2021/12/24 UR - https://pm-research.com/content/early/2021/12/23/jpm.2021.1.322.abstract N2 - 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. ER -