Scientific Beta

The Footnotes Analyst: "This is something that the index provider Scientific Beta has acknowledged in a recent paper ‘Intangible Capital and the Value Factor: Has Your Value Definition Just Expired?’. They suggest that an intangible adjusted value factor better identifies value stocks and that back-testing of their revised approach demonstrates higher out-performance of value relative to growth and without overlap to other factors such as profitability."

The Footnotes Analyst 16/06/2020

"(...) Not making any adjustment in respect of intangibles risks making the book to price ratio useless for identifying value stocks. For example, mature companies with significant unrecognised intangibles risk being incorrectly classified as growth stocks due to an artificially low book to price ratio – a “value false negative”. This is something that the index provider Scientific Beta has acknowledged in a recent paper ‘Intangible Capital and the Value Factor: Has Your Value Definition Just Expired?’. They suggest that an intangible adjusted value factor better identifies value stocks and that back-testing of their revised approach demonstrates higher out-performance of value relative to growth and without overlap to other factors such as profitability. (...) Scientific Beta differentiates between two broad categories of intangibles which it calls knowledge capital and organisational capital. Knowledge capital is derived from the capitalisation of the research and development expense and organisational capital is derived from the capitalisation of other operating expenses that are deemed to contribute to other intangible assets. (...)"