New Technologies and Stock Returns

60 Pages Posted: 23 Dec 2022 Last revised: 8 Apr 2023

Date Written: December 11, 2022


This paper examines whether investing in stocks of companies with high exposure to new technologies leads to potentially high returns due to associated uncertainty. I collect all U.S. patent publications from 1976 to 2021 and all patents that cite or are cited by these publications. Using textual information and citation network data, I identify tech clusters experiencing rapid growth in new patents. A size-adjusted value-weighted portfolio is created by buying stocks of firms with high exposure to new technology and selling stocks of firms with low exposure (new-minus-old factor, NMO). The portfolio generates 7.4\% annual returns and 5.7\% to 14.7\% annualized alphas, depending on the factor model used. I further demonstrate that the results are driven by the risk-return trade-off.

Keywords: New Technology, Portfolio Analysis

JEL Classification: G11, G12, G14, O32

Suggested Citation

Kim, Jinyoung, New Technologies and Stock Returns (December 11, 2022). Available at SSRN: or

Jinyoung Kim (Contact Author)

Boston College

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

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