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Abnormal research and development investments and stock returns

Hilmi Songur and Jason E. Heavilin

The North American Journal of Economics and Finance, 2017, vol. 42, issue C, 237-249

Abstract: We investigate the relation between abnormal research and development (R&D) investments change and expected stock returns. We provide evidence that firms that abnormally increase their R&D investments (RDI) earn higher returns in comparison to the market portfolio. Specifically, our findings document an economically significant annual positive abnormal RDI returns that ranges from 3.2% to 11.5%. These findings are robust to well-established risk factors in the literature and suggest that the abnormal increases in RDI impacts stock returns.

Keywords: R&D intensity; Stock returns (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:eee:ecofin:v:42:y:2017:i:c:p:237-249