Market Valuation of Innovation, Historical Mispricing and Later Correction, U.S. Markets, 1975 – 2021

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dc.contributorAalto Universityen
dc.contributorAalto-yliopistofi
dc.contributor.advisorSean, Shin
dc.contributor.authorAntikainen, Henri
dc.contributor.departmentRahoituksen laitosfi
dc.contributor.schoolKauppakorkeakoulufi
dc.contributor.schoolSchool of Businessen
dc.date.accessioned2023-05-28T16:00:32Z
dc.date.available2023-05-28T16:00:32Z
dc.date.issued2022
dc.description.abstractI study the R&D return predictability using a large sample of all firms listed on NYSE, Nasdaq & AMEX during the years 1975 to 2021. I construct portfolios yearly based on measured firm R&D intensity by R&D expenditure to market capitalization ratio. I then regress the portfolio monthly returns using the CAPM, Carhart model, and a more recent six-factor model proposed by recent academic research. Using these models, I estimate the historical return predictability of R&D intensity in the U.S. markets. I find evidence that historically firm R&D has gone underpriced with the most R&D-intensive equal-weighted portfolio showing an estimated monthly alpha of 1.26% during the first post formation year. Similar risk-adjusted excess returns are also found in value-weighted portfolios. Additionally, to further illuminate the risk premia vs. mispricing debate, I then regress the abnormal monthly returns of the most intensive portfolio using fixed effects to control for post-publication of previous academic research. I find evidence that the return predictability of firm R&D has decreased as market participants have become aware of the R&D anomaly. This finding further signals that historically the R&D anomaly has been driven to a great extent by mispricing rather than additional risk premia.en
dc.format.extent18 + 1
dc.format.mimetypeapplication/pdfen
dc.identifier.urihttps://aaltodoc.aalto.fi/handle/123456789/121064
dc.identifier.urnURN:NBN:fi:aalto-202305283397
dc.language.isoenen
dc.programmeRahoitusen
dc.subject.keywordresearch & developmenten
dc.subject.keywordanomaly discoveryen
dc.subject.keywordpost-publication effecten
dc.subject.keywordapha decayen
dc.titleMarket Valuation of Innovation, Historical Mispricing and Later Correction, U.S. Markets, 1975 – 2021en
dc.titleMarkkinoiden innovaation hinnoittelu, Historiallinen väärinhinnoittelu ja myöhempi korjaus, Yhdysvaltojen markkinat 1975-2021fi
dc.typeG1 Kandidaatintyöfi
dc.type.ontasotBachelor's thesisen
dc.type.ontasotKandidaatintyöfi
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