Revisiting Asset Pricing Models: The Case for an Intangibles Factor

In an increasingly knowledge-based economy, intangible assets may be an important driver of firm performance and stock returns. We introduce an intangibles intensity factor (INT), distinct from the organization capital factor, and show that exposure to this factor strongly predicts stock returns, outperforming traditional factors. Integrating INT into the Fama–French five-factor (FF5) and q-factor models significantly enhances explanatory power across multiple tests and renders the investment factor redundant. An INT-augmented five-factor model (comprising market, size, profitability, momentum, and intangibles factors) outperforms the FF5 and q-factor models in explaining a broad set of anomalies, highlighting the diminishing relevance of the book-to-market and investment factors.