Stock Market Overvaluation, Moon Shots, and Corporate Innovation (Presentation Slides)
54 Pages Posted: 3 Jan 2018 Last revised: 26 May 2018
Date Written: May 1, 2018
These are the presentation slides for the working paper. We test how market overvaluation affects corporate innovation. Estimated stock overvaluation is very strongly associated with R&D, innovative output, and measures of innovative novelty, originality, and scope. R&D is much more sensitive than capital investment to overvaluation. Misvaluation affects R&D more via a non-equity channel than via equity issuance. We document how the sensitivity of R&D and innovative outcomes to misvaluation depends on growth, overvaluation, and turnover. The frequency of exceptionally high innovative inputs/outputs increases with overvaluation. This evidence suggests that market overvaluation may generate social value by increasing innovative output and by encouraging firms to engage in ‘moon shots.’ The paper is available at https://ssrn.com/abstract=2878418.
Keywords: stock market misvaluation, innovation, R&D, patents, behavioral ﬁnance, market eﬃciency
JEL Classification: G14, G32, O32
Suggested Citation: Suggested Citation