In Fama-French factor model Value factor is defined as High book/marketCap Minus Low book/marketCap (HML). That is we take long position in high Book to Market stocks and short position in low Book to Market stocks. This factor has a positive beta so it should be profitable during good times. However it was observed the factor did not do well during late 90s.
One explanation for this is dot-com bubble where in all tech stocks were over valued for long time - a popular saying the Market can stay irrational longer than you can stay solvent.
However the construction of HML has a short coming. Book/Market ratio is not indicative of value for tech stocks! Tech companies are not allowed to capitalize most digital works. For example patents enter the books only when a company is sold. Why do we do this in accounting? For reliability. We trade economic meaning for reliability of books, otherwise credit becomes costly.
For example if Apple develops VisionOS for their new product Vision Pro it is no different from the factory that makes the physical item. Say the physical factory prints out a physical Vision Pro, the software master copy prints itself onto the physical product. It should enter the books like the physical factory. The physical product is contract manufactured so there is no physical factory on the books and there is no VisionOS on the books either. So HML fails to treat Apple as a value company.Due to this accounting issue we end up shorting companies that should not be shorted by the real intent of HML - the view is mine that book value should include all assets that can produce value. Since we added companies worth Trillions of dollars with this issue Value or HML factor will stop working unless make amends to how book value is calculated.