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R&D Spillover and Predictable Returns

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  • Yi Jiang
  • Yiming Qian
  • Tong Yao

Abstract

We show that firms’ R&D activities can predict the stock returns of their industry peers. When an industry experiences substantial R&D growth driven by the activities of a small group of firms, industry peers experience positive abnormal returns and abnormal operating performance despite having no aggressive R&D growth. Exogenous industry shocks to demand or productivity do not explain these results. Further, abnormal returns are concentrated in peer firms that receive low investor attention.

Suggested Citation

  • Yi Jiang & Yiming Qian & Tong Yao, 2016. "R&D Spillover and Predictable Returns," Review of Finance, European Finance Association, vol. 20(5), pages 1769-1797.
    • Handle: RePEc:oup:revfin:v:20:y:2016:i:5:p:1769-1797.
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    References listed on IDEAS

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    Cited by:

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    6. Chen, Zilin & Chu, Liya & Liang, Dawei & Tu, Jun, 2022. "Far away from home: Investors’ underreaction to geographically dispersed information," Journal of Economic Dynamics and Control, Elsevier, vol. 136(C).

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