R&D Spillover and Predictable Returns

Yi Jiang, Yiming Qian and Tong Yao

Review of Finance, 2016, vol. 20, issue 5, 1769-1797

Abstract: We show that firms’ R&D activities can predict the stock returns of their industry peers. When an industry experiences substantial R&D growth driven by the activities of a small group of firms, industry peers experience positive abnormal returns and abnormal operating performance despite having no aggressive R&D growth. Exogenous industry shocks to demand or productivity do not explain these results. Further, abnormal returns are concentrated in peer firms that receive low investor attention.

Date: 2016
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