Patents and R&D expenditure in explaining stock price movements

•We investigate whether the patents can complement R&D expenditure in explaining stock returns.•We find that the number of patents have more significant explanatory power than R&D expenditure.•Hence incorporating the number of patents in explaining stock returns could add value. We investiga...

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Bibliographic Details
Published inFinance research letters Vol. 19; pp. 197 - 203
Main Authors Yu, Gun Jea, Hong, KiHoon
Format Journal Article
LanguageEnglish
Published Elsevier Inc 01.11.2016
Subjects
Corporate innovation
R&D expenditure
Stock price movements
Corporate innovation
Patents
G31
G12
R&D expenditure
O30
Stock price movements
O32
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Summary:•We investigate whether the patents can complement R&D expenditure in explaining stock returns.•We find that the number of patents have more significant explanatory power than R&D expenditure.•Hence incorporating the number of patents in explaining stock returns could add value. We investigate whether the number of patents, classified by exploitation and exploration activities, can complement corporate R&D expenditure in explaining stock price movements (SPM). Based on unique corporate patent data, we empirically find that the number of patents have more significant explanatory power in explaining SPM than R&D expenditure. Our results indicate that incorporating the number of patents in explaining SPM could add value.
ISSN:1544-6123
1544-6131
DOI:10.1016/j.frl.2016.07.012