Review of Finance, Forthcoming
44 Pages Posted: 23 Sep 2012 Last revised: 16 Dec 2015
Date Written: August 1, 2015
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: 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