R&D Spillover and Predictable Returns
California State University, Fullerton
University of Iowa - Department of Finance
University of Iowa - Henry B. Tippie College of Business
August 1, 2015
Review of Finance, Forthcoming
We show that firms’ R&D activities can predict the stock returns of their industry peers. When an industry experiences substantial R&D growth driven by the activities of a small group of firms, industry peers experience positive abnormal returns and abnormal operating performance despite having no aggressive R&D growth. Exogenous industry shocks to demand or productivity do not explain these results. Further, abnormal returns are concentrated in peer firms that receive low investor attention.
Number of Pages in PDF File: 44
Keywords: R&D spillover, limited attention, stock return predictability
JEL Classification: O3, G1, G02
Date posted: September 23, 2012 ; Last revised: December 16, 2015
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