This paper (2019) from Prof. Lev and Srivastava:

“The business press claims that the long-standing and highly popular value investing strategy—investing in low-valued stocks and selling short high-valued equities—lost its edge since 2007. The reasons for this putative sudden demise of value investing elude investors and academics, making it a challenge to assess the likelihood of the return of value investing to its days of glory. Based on extensive data analysis we show that the strategy has, in fact, been unprofitable for almost 30 years, barring a brief resurrection following dotcom bust. We identify two major reasons for the demise of value: (1) accounting deficiencies causing systematic misidentification of value, and particularly of glamour (growth) stocks, and (2) fundamental economic developments which slowed down significantly the reshuffling of value and glamour stocks which drove the erstwhile gains from the value strategy. We end up by speculating on the likelihood of the resurgence of value investing, which seems low.”

This is the same Lev who wrote the Death of Accounting and that argues that accounting metrics are not very relevant any more.

That concept is a key component of the idea that intangible capital is now one of the most important types of capital which you can see in the Westlake & Haskel book. Capitalism without Capital.

However even with (some) adjusting for intangibles Lev can not fully explain the “value trap”. Lev then explains this be reference to the economic fundamentals that value companies in the last decade might need to recover. They suggest value companies have not been able to invest to recover profitability as measured by eg Return on Equity or Assets (graph above)

The authors then speculate that these might be structural changes which might make it hard for these companies to recover.

Critics may suggest that this is primarily a critique of price/book or book price and that “value” or the “value factor” as practised by quant investors today is not a reflection of price to book.

The debate on “value factor” and “value” continues amongst investors.

Link to Lev paper here.