Citations (1)



R&D Spillover and Predictable Returns

Yi Jiang

California State University, Fullerton

Yiming Qian

University of Iowa - Department of Finance

Tong Yao

University of Iowa - Henry B. Tippie College of Business

July 19, 2014

We show that a firm’s stock return is predictable by R&D activities of other firms in the industry, and that such predictability is related to investor inattention to cross-firm information. We identify a small group of industry “R&D Leaders” that have a burst of R&D activities and a large group of “Peers” that are in the same industry but do not have substantial R&D increases. We find that Peers experience significantly positive abnormal returns and abnormal operating performance in subsequent years. Such results are not explained away by exogenous industry shocks to demand or productivity. Further, abnormal returns to Peers are concentrated in those having low investor attention.

Number of Pages in PDF File: 48

Keywords: limited attention, R&D, spillover, externality, predictable returns

JEL Classification: O3, G1, G02

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Date posted: September 23, 2012 ; Last revised: July 20, 2014

Suggested Citation

Jiang, Yi and Qian, Yiming and Yao, Tong, R&D Spillover and Predictable Returns (July 19, 2014). Available at SSRN: http://ssrn.com/abstract=2150742 or http://dx.doi.org/10.2139/ssrn.2150742

Contact Information

Yi Jiang (Contact Author)
California State University, Fullerton ( email )
P.O. Box 6848
Fullerton, CA CA 92834-6848
United States
657-278-4363 (Phone)
657-278-2161 (Fax)
HOME PAGE: http://business.fullerton.edu/finance/yjiang/
Yiming Qian
University of Iowa - Department of Finance ( email )
S382 Pappajohn Building
Iowa City, IA 52242
United States
319-335-0934 (Phone)
319-335-3690 (Fax)
Tong Yao
University of Iowa - Henry B. Tippie College of Business ( email )
108 Pappajohn Business Building
Iowa City, IA 52242-1000
United States
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