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R&D investments and high-tech firms' stock return volatility

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Author Info

  • Sami Gharbi
  • Jean-Michel Sahut
  • Frédéric Teulon

Abstract

The empirical evidence suggests that firms in high-tech industries exhibit high stock return volatility. In this paper, we conceive of the R&D investment intensity as a possible explanation for the stock volatility behavior in these industries. We suggest that R&D activities generate information asymmetry about the prospects of the firm and make its stock riskier. Relying on Panel data models, we investigate this relationship for French high-tech firms. We find out a strong positive relationship between stock return volatility and R&D investment intensity. This finding suggests that R&D intensive firms should implement an efficient information disclosure policy to reduce information asymmetry and to avoid excessive stock return volatility.

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File URL: http://www.ipag.fr/wp-content/uploads/recherche/WP/IPAG_WP_2014_218.pdf
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Bibliographic Info

Paper provided by Department of Research, Ipag Business School in its series Working Papers with number 2014-218.

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Length: 15 pages
Date of creation: 10 Apr 2014
Date of revision:
Handle: RePEc:ipg:wpaper:2014-218

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Related research

Keywords: R&D; Idiosyncratic idiosyncratic volatility; Riskrisk; Asymmetric asymmetric information; Stock stock return; Innovationinnovation; Highhigh-tech firms;

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