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R&D Progress, stock price volatility, and post-announcement drift: An empirical investigation into biotech firms

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Author Info
Bixia Xu ()
Abstract

I investigate the effects of R&D progress on the dynamics of stock price volatility and the post announcement drift to provide insights into whether or not and how capital markets react to corporate R&D progress in the context of the biotech industry. I find both stock price volatility and the post announcement drift decrease in R&D progress. More importantly, the decrease is proportional to the increase in the drug development success rate driven by R&D progress. Findings suggest that R&D progress conveys useful risk-relevant information, and plays an important role in explaining stock price volatility change and market anomalies. Copyright Springer Science + Business Media, LLC 2006

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File URL: http://hdl.handle.net/10.1007/s11156-006-7439-x
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Publisher Info
Article provided by Springer in its journal Review of Quantitative Finance and Accounting.

Volume (Year): 26 (2006)
Issue (Month): 4 (June)
Pages: 391-408
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Handle: RePEc:kap:rqfnac:v:26:y:2006:i:4:p:391-408

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Web page: http://springerlink.metapress.com/link.asp?id=102990

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Related research
Keywords: R&; D progress; Stock price volatility; Post-announcement drift;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February. [Downloadable!] (restricted)
  2. Louis K. C. Chan, 2001. "The Stock Market Valuation of Research and Development Expenditures," Journal of Finance, American Finance Association, vol. 56(6), pages 2431-2456, December. [Downloadable!] (restricted)
  3. Francis, Jennifer & LaFond, Ryan & Olsson, Per & Schipper, Katherine, 2003. "Accounting Anomalies and Information Uncertainty," SIFR Research Report Series 13, Institute for Financial Research. [Downloadable!]
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