EconPapers    
Economics at your fingertips  
 

Innovative efficiency and stock returns: Should we care about nonlinearity?

Houdou Basse Mama

Finance Research Letters, 2018, vol. 24, issue C, 81-89

Abstract: Recent research suggests that a firm’s innovative efficiency (IE) is a strong positive predictor of future stock returns. Using a panel of 3084 international firms over the 1999–2015 period, this study attests to the predictive power of IE for subsequent returns, but disputes the linearity of the underlying relationship. Specifically, portfolio analyses and Fama and MacBeth (1973) regressions demonstrate that IE shares a robust U-shaped relationship with future stock returns, market valuations, and operating performance. This evidence is new to the literature and bears important implications for investment and security analysis, innovative-intensive firms, policy-making, and academic research as well.

Keywords: Innovative efficiency; Patents; Research and development; Nonlinearity (search for similar items in EconPapers)
JEL-codes: G12 G14 O32 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1544612317302726
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:24:y:2018:i:c:p:81-89

DOI: 10.1016/j.frl.2017.07.001

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Haili He ().

 
Page updated 2020-05-02
Handle: RePEc:eee:finlet:v:24:y:2018:i:c:p:81-89