How do investors trade R&D-intensive Stocks? Evidence from hedge funds and other institutional investors

Dallin M. Alldredge, Mustafa O. Caglayan and Umut Celiker

Journal of Banking & Finance, 2022, vol. 134, issue C

Abstract: We examine how institutional investors trade stocks with high research and development (R&D) expenses and investigate whether they can detect value-relevant R&D. We document significant differences between hedge funds and other institutional investors in their trading in high R&D stocks. We find that hedge funds (other institutional investors) invest more (less) in high R&D stocks compared to all other stocks. Moreover, hedge funds exhibit strong stock-picking ability in high R&D stocks, and hedge funds with larger allocations to high R&D stocks generate higher future fund returns. Our findings suggest that hedge funds have superior skill in identifying value-relevant R&D.

Keywords: Research and development (R&D); Institutional trading; Hedge funds (search for similar items in EconPapers)
JEL-codes: C13 G10 G11 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:134:y:2022:i:c:s0378426621002880

DOI: 10.1016/j.jbankfin.2021.106337

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