Innovation and Industry Selection
13 Pages Posted: 19 Jan 2019 Last revised: 1 Mar 2019
Date Written: February 28, 2019
We use a novel dataset of company-level innovation measures to identify the most innovative industries based on counts of their applications for foreign worker visas and their patent applications and grants. We are able to build portfolios which overweight these innovative industries and which generate economically significant excess returns, especially in the 2013-2018 period, with low turnover. The results do not appear to be fully explained by risk factors, and the same innovation measures do not predict returns at the single stock level.
Keywords: innovative efficiency, asset allocation
JEL Classification: O3, G12, G14
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