Effects of Capitalizing Intangibles on Factor Models of Stock Returns
March 8, 2021 - Fundamental Valuation
Under current U.S. accounting rules, many investments in innovation, human resources and brand that are crucial to long-term competitiveness immediately reduce operating profits and earnings (are expensed rather than capitalized). Does failure to incorporate such intangible investments in firm investment and valuation ratios (book-to-market, profitability and return on equity) harm equity investment decisions? In their… Keep Reading