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R&D Spillover and Predictable Returns

Review of Finance, Forthcoming

44 Pages Posted: 23 Sep 2012 Last revised: 16 Dec 2015

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

Date Written: August 1, 2015

Abstract

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.

Keywords: R&D spillover, limited attention, stock return predictability

JEL Classification: O3, G1, G02

Suggested Citation

Jiang, Yi and Qian, Yiming and Yao, Tong, R&D Spillover and Predictable Returns (August 1, 2015). Review of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2150742 or http://dx.doi.org/10.2139/ssrn.2150742

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 )

Acquisitions
5020 Main Library
Iowa City, IA 52242-1000
United States

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