Innovation and Idiosyncratic Risk: an Industry & Firm Level Analysis
Mariana Mazzucato () and
Massimiliano Tancioni ()
No 50, Open Discussion Papers in Economics from The Open University, Faculty of Social Sciences, Department of Economics
Recent studies find that idiosyncratic risk (IR) has increased since the 1960's and attribute this to economy wide factors such as the role of the IT revolution. To gain further insights into why IR has increased over time, our paper uses industry level data and firm level data to study if industries considered "very innovative" and R&D intensive firms are characterized by higher IR due to how innovation activity affects the uncertainty of expected future profits. While the industry level results prove inconclusive, the firm level results are encouraging: a clear relationship is found between a firm's R&D intensity and the volatility of its returns.
Keywords: Idiosyncratic Risk; Volatility; Technological Change; Industry Life Cycle (search for similar items in EconPapers)
JEL-codes: G12 O30 (search for similar items in EconPapers)
Pages: 46 pages
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Published in Computing in Economics and Finance 2005 81, Society for Computational Economics
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Working Paper: Innovation and Idiosyncratic Risk (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:opn:wpaper:50
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