Recent finance literature highlights the role of technological change in increasing firm specific (idiosyncratic) and aggregate stock return volatility, yet innovation data is not used in these analyses, leaving the direct relationship between innovation and stock return volatility untested. The paper investigates the relationship between volatility and innovation using firm level patent data. The analysis builds on the empirical work by Mazzucato (Rev Econ Dyn 5:318-345, 2002; J Evol Econ 13(5):491-512, 2003) where it is found that stock return volatility is highest during periods in the industry life-cycle when innovation is the most ‘radical’. In this paper we ask whether firms which invest more in innovation (more R&D and more patents) and/or which have more important innovations (patents with more citations) experience more volatility in their returns. Given that returns should in theory be higher, on average, for higher risk stocks, we also look at the effect of innovation on the level of returns. To take into account the competition between firms within industries, firm returns and volatility are measured relative to the industry average. We focus the analysis on firms in the pharmaceutical industry between 1974 and 1999. Results suggest that there is a positive and significant relationship between volatility, R&D intensity and the various patent related measures-especially when the innovation measures are filtered to distinguish the very innovative firms from the less innovate ones.

R&D, patents and stock return volatility / Mazzucato, Mariana; Tancioni, Massimiliano. - (2013), pp. 341-362. [10.1007/978-3-642-35125-9].

R&D, patents and stock return volatility

Tancioni, Massimiliano
2013

Abstract

Recent finance literature highlights the role of technological change in increasing firm specific (idiosyncratic) and aggregate stock return volatility, yet innovation data is not used in these analyses, leaving the direct relationship between innovation and stock return volatility untested. The paper investigates the relationship between volatility and innovation using firm level patent data. The analysis builds on the empirical work by Mazzucato (Rev Econ Dyn 5:318-345, 2002; J Evol Econ 13(5):491-512, 2003) where it is found that stock return volatility is highest during periods in the industry life-cycle when innovation is the most ‘radical’. In this paper we ask whether firms which invest more in innovation (more R&D and more patents) and/or which have more important innovations (patents with more citations) experience more volatility in their returns. Given that returns should in theory be higher, on average, for higher risk stocks, we also look at the effect of innovation on the level of returns. To take into account the competition between firms within industries, firm returns and volatility are measured relative to the industry average. We focus the analysis on firms in the pharmaceutical industry between 1974 and 1999. Results suggest that there is a positive and significant relationship between volatility, R&D intensity and the various patent related measures-especially when the innovation measures are filtered to distinguish the very innovative firms from the less innovate ones.
2013
Long Term Economic Development: Demand, Finance, Organization, Policy and Innovation in a Shumpeterian Perspective
978-3-642-35124-2
idiosyncratic risk; volatility; technological change; industry life-cycle
02 Pubblicazione su volume::02a Capitolo o Articolo
R&D, patents and stock return volatility / Mazzucato, Mariana; Tancioni, Massimiliano. - (2013), pp. 341-362. [10.1007/978-3-642-35125-9].
File allegati a questo prodotto
File Dimensione Formato  
Cover.pdf

solo gestori archivio

Note: https://link.springer.com/chapter/10.1007/978-3-642-35125-9_15
Tipologia: Documento in Post-print (versione successiva alla peer review e accettata per la pubblicazione)
Licenza: Tutti i diritti riservati (All rights reserved)
Dimensione 42.01 kB
Formato Adobe PDF
42.01 kB Adobe PDF   Contatta l'autore
2013_Bookmatter_LongTermEconomicDevelopment_index.pdf

solo gestori archivio

Note: https://link.springer.com/book/10.1007/978-3-642-35125-9#toc
Tipologia: Documento in Post-print (versione successiva alla peer review e accettata per la pubblicazione)
Licenza: Tutti i diritti riservati (All rights reserved)
Dimensione 38.19 kB
Formato Adobe PDF
38.19 kB Adobe PDF   Contatta l'autore
Tancioni_Patents_2013.pdf

solo gestori archivio

Tipologia: Documento in Post-print (versione successiva alla peer review e accettata per la pubblicazione)
Licenza: Tutti i diritti riservati (All rights reserved)
Dimensione 613.35 kB
Formato Adobe PDF
613.35 kB Adobe PDF   Contatta l'autore

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11573/1196484
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus ND
  • ???jsp.display-item.citation.isi??? ND
social impact