Mispricing vs risk premia in R&D-intensive firms

Ben Branch and Cosette Chichirau

International Review of Financial Analysis, 2010, vol. 19, issue 5, 358-367

Abstract: We utilize the NBER's patent database to reevaluate relationships between R&D on the one hand and firm fundamentals and stock returns on the other. Patent counts and patent citations are used to measure R&D quantity and quality respectively. Our R&D variables are all positively associated with growth and negatively associated with profitability. Using R&D spending and citations intensities to form stock portfolios, we are able to distinguish winners from losers. Investors who can effectively evaluate the quality of the R&D performed, may be able profitably to exploit the risk premium applied to the stock of R&D-intensive companies.

Keywords: R&; D; Research; and; development; Patents; Patent; citations; NBER; patent; database (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:19:y:2010:i:5:p:358-367

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