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R&D investments and high-tech firms' stock return volatility

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  • Gharbi, Sami
  • Sahut, Jean-Michel
  • Teulon, Frédéric

Abstract

The empirical evidence suggests that firms in high-tech industries exhibit high stock return volatility. In this paper, we conceive of the R&D investment intensity as a possible explanation for the stock volatility behavior in these industries. We suggest that R&D activities generate information asymmetry about the prospects of the firm and make its stock riskier. Relying on Panel data models, we investigate this relationship for French high-tech firms. We find out a strong positive relationship between stock return volatility and R&D investment intensity. This finding suggests that R&D intensive firms should implement an efficient information disclosure policy to reduce information asymmetry and to avoid excessive stock return volatility.

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  • Gharbi, Sami & Sahut, Jean-Michel & Teulon, Frédéric, 2014. "R&D investments and high-tech firms' stock return volatility," Technological Forecasting and Social Change, Elsevier, vol. 88(C), pages 306-312.
    • Handle: RePEc:eee:tefoso:v:88:y:2014:i:c:p:306-312
    DOI: 10.1016/j.techfore.2013.10.006
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