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Intangible Value

Author

Listed:
  • Andrea L. Eisfeldt
  • Edward T. Kim
  • Dimitris Papanikolaou

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.

Suggested Citation

  • Andrea L. Eisfeldt & Edward T. Kim & Dimitris Papanikolaou, 2022. "Intangible Value," Critical Finance Review, now publishers, vol. 11(2), pages 299-332, May.
    • Handle: RePEc:now:jnlcfr:104.00000113
    DOI: 10.1561/104.00000113
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    Keywords

    299-332;

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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