Presentation Slides for 'Innovative Efficiency and Stock Returns'

21 Pages Posted: 15 Jun 2018

See all articles by David A. Hirshleifer

David A. Hirshleifer

University of California, Irvine - Paul Merage School of Business; NBER

Po-Hsuan Hsu

National Tsing Hua University - Department of Quantitative Finance

Dongmei Li

University of South Carolina - Darla Moore School of Business - Department of Finance

Date Written: June 5, 2018

Abstract

These are the presentation slides for the paper "Innovative Efficiency and Stock Returns". The abstract of the paper is the following: We find that innovative efficiency (IE), patents or citations scaled by research and development expenditures, is a strong positive predictor of future returns after controlling for firm characteristics and risk. The IE-return relation is associated with the loading on a mispricing factor, and the high Sharpe ratio of the Efficient Minus Inefficient (EMI) portfolio suggests that mispricing plays an important role. Further tests based upon attention and uncertainty proxies suggest that limited attention contributes to the effect. The high weight of the EMI portfolio return in the tangency portfolio suggests that IE captures incremental pricing effects relative to well-known factors.

Link to the paper: https://ssrn.com/abstract=1799675.

Keywords: Innovative efficiency, Limited attention, Research and development, Market efficiency

JEL Classification: G12, G14, O32

Suggested Citation

Hirshleifer, David A. and Hsu, Po-Hsuan and Li, Dongmei, Presentation Slides for 'Innovative Efficiency and Stock Returns' (June 5, 2018). Journal of Financial Economics (JFE), Vol. 107, 2013. Available at SSRN: https://ssrn.com/abstract=3191073

David A. Hirshleifer

University of California, Irvine - Paul Merage School of Business ( email )

Irvine, CA California 92697-3125
United States

HOME PAGE: http://sites.uci.edu/dhirshle/

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Po-Hsuan Hsu

National Tsing Hua University - Department of Quantitative Finance ( email )

101, Section 2, Kuang-Fu Road
Hsinchu, Taiwan 300
China

Dongmei Li (Contact Author)

University of South Carolina - Darla Moore School of Business - Department of Finance ( email )

1014 Greene Street
Columbia, SC 29208
United States

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