Hou, Kewei, Hsu, Po-Hsuan, WANG, SHIHENG, Watanabe, Akiko and Xu, Yan. "Corporate R&D and Stock Returns: International Evidence" Journal of Financial and Quantitative Analysis, April 2021, p. 1-72

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 return is more likely attributable to risk premium than to mispricing.

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