Intangible Value

Andrea Eisfeldt, Edward Kim and Dimitris Papanikolaou

No 28056, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: E22 G12 (search for similar items in EconPapers)
Date: 2020-11
New Economics Papers: this item is included in nep-cfn and nep-mac
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Published as Andrea L. Eisfeldt & Edward T. Kim & Dimitris Papanikolaou, 2022. "Intangible Value," Critical Finance Review, vol 11(2), pages 299-332.

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Journal Article: Intangible Value (2022)
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