Essays on the impact of market information on stock markets: R&D, patents and money illusion.

摘要

This dissertation identifies patents and R&D expenditures as firm-level information variables, and investigates how they affect the pricing of assets in the stock market. In the first essay, the question as to whether patents and R&D represent adverse selection risk is investigated. Firms investing in patents and R&D may present an uncertain outcome for investors who do not have the privilege of insider information. This may increase the adverse selection cost for uninformed investors. For the uninformed investor to hold stocks with more private information, he must be compensated for taking on more firm characteristic risk. The empirical results show that patents and R&D activities imply higher average returns. Further evidence illustrates that the return premiums for patents and R&D show differences in their information structures. Patents appear to reduce the degree of asymmetric information and lower the extent to which R&D affects average returns. Patents by a firm appear to represent increased exposure to a priced systematic risk factor. The second paper evaluates abnormal returns from a trading strategy that selects stocks on the basis of previous patents issued to firms. The cumulative abnormal returns due to previously issued patents reflect a revision of the firm's expected returns resulting from future price correction. Evidence presented in the essay suggests the possibility of a systematic-risk-based explanation to the abnormal returns from patent-based trading strategies. The third paper extends the Modigliani-Cohn hypothesis to the international context. The paper argues on the basis of increasing interdependence of the world financial markets, and the dominant role played by the US market that, if the US stock market suffers from money illusion, then the developed international markets must also suffer from money illusion. The empirical analysis supports this hypothesis.