Corporate R&D and Stock Returns: International Evidence. (8th June 2022)

• Record Type: Journal Article
• Authors: Hou, Kewei; Hsu, Po-Hsuan; Wang, Shiheng; Watanabe, Akiko; Xu, Yan
• Is Part Of: Journal of financial and quantitative analysis. Volume 57:Number 4(2022)
• Page Start: 1377
• Page End: 1408
• Publication Date: 2022-06-08
• Subjects: Finance -- Periodicals; Investments -- Mathematics -- Periodicals; 332.05
• DOI: 10.1017/S002210902100020X
• Languages: English
• ISSNs: 0022-1090

Abstract

Abstract: Firms with higher R&D intensity subsequently experience higher stock returns in international stock markets, highlighting the role of intangible investments in international asset pricing. The R&D effect is stronger in countries where growth option risk is more likely priced, but is unrelated to country characteristics representing market sentiments and limits-of-arbitrage. Moreover, we find that R&D intensity is associated with higher future operating performance, return volatility, and default likelihood. Our evidence suggests that the cross sectional relation between R&D intensity and stock returns is more likely attributable to risk premium than to mispricing.