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The Stock Market Valuation of Research and Development Expenditures.
- Source :
- Journal of Finance (Wiley-Blackwell); Dec2001, Vol. 56 Issue 6, p2431-2456, 26p, 7 Charts
- Publication Year :
- 2001
-
Abstract
- We examine whether stock prices fully value firms' intangible assets, specifically research and development (R&D). Under current U.S. accounting standards, financial statements do not report intangible assets and R&D spending is expensed. Nonetheless, the average historical stock returns of firms doing R&D matches the returns of firms without R&D. However, the market is apparently too pessimistic about beaten-down R&D-intensive technology stocks' prospects. Companies with high R&D to equity market value (which tend to have poor past returns) earn large excess returns. A similar relation exists between advertising and stock returns. R&D intensity is positively associated with return volatility. [ABSTRACT FROM AUTHOR]
Details
- Language :
- English
- ISSN :
- 00221082
- Volume :
- 56
- Issue :
- 6
- Database :
- Complementary Index
- Journal :
- Journal of Finance (Wiley-Blackwell)
- Publication Type :
- Academic Journal
- Accession number :
- 5528860
- Full Text :
- https://doi.org/10.1111/0022-1082.00411