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Intangible Value

Andrea L. Eisfeldt, Edward T. Kim and Dimitris Papanikolaou

Critical Finance Review, 2022, vol. 11, issue 2, 299-332

Abstract: Intangible assets are absent from traditional measures of firm 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 addresses differences in accounting practices across industries. Our intangible value factor prices assets as well as or better than the traditional value factor but yields substantially higher returns. This outperformance holds over the entire sample period, including in more recent decades during 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.

Keywords: 299-332 (search for similar items in EconPapers)
JEL-codes: E22 G1 G10 G11 (search for similar items in EconPapers)
Date: 2022
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