R&D Progress, Stock Price Volatility and Post-Announcement Drift: An Empirical Invesitgation into Biotech Firms (ABSTRACT)
published: 2006 | Research publication | Refereed Journals - Accounting
Xu, B. (2006). "R&D Progress, Stock Price Volatility and Post-Announcement Drift: An Empirical Invesitgation into Biotech Firms". Review of Quantitative Finance and Accounting, 26, 391-408.
ABSTRACT: I investigate the effects of R&D progress on the dynamics of stock price volatility and the post announcement drift to provide insights into whether or not and how capital markets react to corporate R&D progress in the context of the biotech industry. I find both stock price volatility and the post announcement drift decrease in R&D progress. More importantly, the decrease is proportional to the increase in the drug development success rate driven by R&D progress. Findings suggest that R&D progress conveys useful risk-relevant information, and plays an important role in explaining stock price volatility change and market anomalies.
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revised Oct 3/06
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