We study whether R&D-intensive firms earn superior stock returns compared to matched size and book-to-market portfolios across several financial markets in Europe. Mispricing can arise if investors are not able to correctly estimate the long-term benefits of R&D investment or whether R&D firms are more risky than others. The results confirm that more innovative firms can earn future excess returns. Stocks listed on continental Europe markets and operating in high-tech sectors are more prone to undervaluation. This can be caused in the first case by information asymmetries that are more severe in bank-based countries. No evidence is found for a different risk pattern of R&D-intensive stocks.
Andi Duqi, Aziz Jaafar, Giuseppe Torluccio (2015). Mispricing and risk of R&D investment in European firms. EUROPEAN JOURNAL OF FINANCE, 21(5), 444-465 [10.1080/1351847X.2013.838185].
Mispricing and risk of R&D investment in European firms
DUQI, ANDI;TORLUCCIO, GIUSEPPE
2015
Abstract
We study whether R&D-intensive firms earn superior stock returns compared to matched size and book-to-market portfolios across several financial markets in Europe. Mispricing can arise if investors are not able to correctly estimate the long-term benefits of R&D investment or whether R&D firms are more risky than others. The results confirm that more innovative firms can earn future excess returns. Stocks listed on continental Europe markets and operating in high-tech sectors are more prone to undervaluation. This can be caused in the first case by information asymmetries that are more severe in bank-based countries. No evidence is found for a different risk pattern of R&D-intensive stocks.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.