In this episode, we speak with Sparkline Capital founder Kai Wu about his excellent recent paper "Intangible Value: A Sixth Factor". We discuss his research on the importance of intangible assets, how to measure them and turn them into a value factor, the benefits of intangible value to a multi-factor portfolio, and how he used it to construct a 6-factor model.
00:00 - Intro
02:57 - The importance of intangible assets
06:07 - The pros and cons of capitalizing intangibles
09:50 - The four pillars on intangibles
11:04 - Turning intangibles into a value factor
13:56 - How far back can we test intangible-based strategies?
16:13 - The performance of the intangible value factor relative to the other major factors
18:43 - The correlation of intangible value with the other factors
20:23 - What is the goal of asset pricing models?
20:59 - The history of asset pricing models
23:04 - Analyzing whether intangible value adds value to existing factor models
26:52 - Does intangible value replace or complement traidtional value?
28:51 - Why is there not of academic work on intangible value?
31:38 - Using intangible value in a long-only framework
34:02 - Are there existing ETFs with high exposure to intangible value?
38:06 - The bad factor exposures that typically come with innovation
46:28 - Building a six factor model with intangible value
KAI'S PAPER
https://www.sparklinecapital.com/post/intangible-value-a-sixth-factor
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https://twitter.com/ckaiwu
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https://www.validea.com
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https://www.valideacapital.com
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