NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
loading...

Innovative Originality, Profitability, and Stock Returns

David Hirshleifer, Po-Hsuan Hsu, Dongmei Li

NBER Working Paper No. 23432
Issued in May 2017
NBER Program(s):Asset Pricing, Corporate Finance

We propose that innovative originality (InnOrig) is a valuable organizational resource, and that owing to limited investor attention and skepticism of complexity, firms with greater InnOrig are undervalued. We find that firms’ InnOrig strongly predicts higher, more persistent, and less volatile profitability; and higher abnormal stock returns—findings that are robust to extensive controls. The return predictive power of InnOrig is stronger for firms with higher valuation uncertainty, lower investor attention, and greater sensitivity of future profitability to InnOrig. This evidence suggests that innovative originality acts as a ‘competitive moat,’ and that the market undervalues InnOrig.

download in pdf format
   (528 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w23432

Published: David Hirshleifer & Po-Hsuan Hsu & Dongmei Li, 2018. "Innovative Originality, Profitability, and Stock Returns," The Review of Financial Studies, vol 31(7), pages 2553-2605.

Users who downloaded this paper also downloaded* these:
DeFusco, Nathanson, and Zwick w23449 Speculative Dynamics of Prices and Volume
Farboodi and Veldkamp w23457 Long Run Growth of Financial Technology
Kuhnen, Rudorf, and Weber w23438 The Effect of Prior Choices on Expectations and Subsequent Portfolio Decisions
Hamilton w14492 Understanding Crude Oil Prices
Auclert w23451 Monetary Policy and the Redistribution Channel
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us