Effects of unusual R&D expenditures on stock returns -- evidences from the listed companies in Taiwan

Jian-Fa Li, Yih-Bey Lin and Cheng-Yih Hong

Applied Economics Letters, 2012, vol. 19, issue 4, 383-386

Abstract: This study examines the Research and Development (R&D) effect on stock returns. By modifying Kyle's (1985) model, we construct an asset pricing model and propose a related hypothesis to investigate the information-related content of unusual increases in R&D expenditures. The empirical evidence shows that R&D increases might not be beneficial investments and the information-related value of R&D increases is gradually incorporated in the stock price system. Therefore, we document that the stock market is informationally efficient in the semi-strong form.

Date: 2012
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DOI: 10.1080/13504851.2011.579057

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