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Innovation and Stock Prices: a Review of some Recent Work

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  • Mariana Mazzucato

Abstract

The paper reviews work which draws a link between the dynamics of innovation and the dynamics of stock prices. One of the key findings is the relationship between innovation intensity (e.g. radical innovation) and the volatility of firm level stock returns. By connecting the analysis of risk and uncertainty? often related in the finance literature to ?animal spirits? and other stochastic factors? to changes in real production conditions at the firm and industry level, the paper provides the foundation for a Schumpeterian analysis of time varying risk. JEL Classification: G12, 030.

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Bibliographic Info

Article provided by Presses de Sciences-Po in its journal Revue de l'OFCE.

Volume (Year): 97 bis (2006)
Issue (Month): 5 ()
Pages: 159-179

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Handle: RePEc:cai:reofsp:reof_073_0159

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Keywords: idiosyncratic risk; volatility; technological change; industry life cycle;

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References

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  1. Darren Filson, 2001. "The Nature and Effects of Technological Change over the Industry Life Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(2), pages 460-494, July.
  2. John Y. Campbell, 2000. "Asset Pricing at the Millennium," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 1897, Harvard - Institute of Economic Research.
  3. Steve J. Davis & John Haltiwanger, 1991. "Gross Job Creation, Gross Job Destruction and Employment Reallocation," NBER Working Papers 3728, National Bureau of Economic Research, Inc.
  4. Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 100(5), pages 992-1026, October.
  5. Pindyck, Robert S., 1983. "Risk, inflation, and the stock market," Working papers, Massachusetts Institute of Technology (MIT), Sloan School of Management 1423-83., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  6. John Y. Campbell & Robert J. Shiller, 1988. "Stock Prices, Earnings and Expected Dividends," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 858, Cowles Foundation for Research in Economics, Yale University.
  7. Shiller, Robert J, 1981. "Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?," American Economic Review, American Economic Association, American Economic Association, vol. 71(3), pages 421-36, June.
  8. Timothy F. Bresnahan & Shane Greenstein, 1997. "Technological Competition and the Structure of the Computer Industry," Working Papers, Stanford University, Department of Economics 97028, Stanford University, Department of Economics.
  9. Richard R. Nelson, 2003. "The Market Economy, and the Scientific Commons," LEM Papers Series, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy 2003/24, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  10. Paul Geroski & Mariana Mazzucato, 2002. "Learning and the sources of corporate growth," Industrial and Corporate Change, Oxford University Press, vol. 11(4), pages 623-644, August.
  11. Pietro Veronesi & Lubos Pastor, 2005. "Was There a Nasdaq Bubble in the Late 1990s?," 2005 Meeting Papers, Society for Economic Dynamics 95, Society for Economic Dynamics.
  12. Boyan Jovanovic & Glenn MacDonald, 1993. "The Life-Cycle of a Competitive Industry," NBER Working Papers 4441, National Bureau of Economic Research, Inc.
  13. Gort, Michael & Klepper, Steven, 1982. "Time Paths in the Diffusion of Product Innovations," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 92(367), pages 630-53, September.
  14. Mariana Mazzucato, 2002. "The PC Industry: New Economy or Early Life-Cycle?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(2), pages 318-345, April.
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