Technology prospects and the cross-section of stock returns

Po-Hsuan Hsu and Dayong Huang

Journal of Empirical Finance, 2010, vol. 17, issue 1, 39-53

Abstract: In an economy with time-varying investment opportunities, the changes in technology prospects affect aggregate consumption and individual firm's future dividends, and lead to systematic technology risk. We construct a technology factor to track the changes in technology prospects measured by U.S. patent shocks, and find that this factor explains the growth of aggregate consumption, helps to price important stock portfolios, and carries significant risk premium. Our empirical results suggest the existence of technology risk in the cross-section of stock returns.

Keywords: Factor; models; Patents; Technological; innovations; Tracking; portfolios (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:17:y:2010:i:1:p:39-53

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