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Mispricing vs risk premia in R&D-intensive firms

  • Branch, Ben
  • Chichirau, Cosette
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    We utilize the NBER's patent database to reevaluate relationships between R&D on the one hand and firm fundamentals and stock returns on the other. Patent counts and patent citations are used to measure R&D quantity and quality respectively. Our R&D variables are all positively associated with growth and negatively associated with profitability. Using R&D spending and citations intensities to form stock portfolios, we are able to distinguish winners from losers. Investors who can effectively evaluate the quality of the R&D performed, may be able profitably to exploit the risk premium applied to the stock of R&D-intensive companies.

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    Article provided by Elsevier in its journal International Review of Financial Analysis.

    Volume (Year): 19 (2010)
    Issue (Month): 5 (December)
    Pages: 358-367

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    Handle: RePEc:eee:finana:v:19:y:2010:i:5:p:358-367
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620166

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