Corporate Innovation, Price Momentum, and Equity Returns

54 Pages Posted: 7 Feb 2005

See all articles by Maria Vassalou

Maria Vassalou

Centre for Economic Policy Research (CEPR)

Kodjo Apedjinou

Columbia University - Graduate School of Business

Date Written: November 8, 2004

Abstract

We define corporate innovation (CI) as the proportion of a firm's change in gross profit margin not explained by the change in the capital and labor it utilizes. We show that CI contains important information about expected equity returns. This information is very different from information contained in earnings surprises variables. It is however strongly related to the information contained in past returns, and can explain much of the performance of price momentum strategies.

Keywords: Corporate innovation, earnings surprises, price momentum, reversals

JEL Classification: G12, G14

Suggested Citation

Vassalou, Maria and Apedjinou, Kodjo, Corporate Innovation, Price Momentum, and Equity Returns (November 8, 2004). Available at SSRN: https://ssrn.com/abstract=663361 or http://dx.doi.org/10.2139/ssrn.663361

Maria Vassalou (Contact Author)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Kodjo Apedjinou

Columbia University - Graduate School of Business ( email )

3022 Broadway
New York, NY 10027
United States

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