Journal of Economics and Business

ISSN 2615-3726 (Online)

ISSN 2621-5667 (Print)

Published: 18 August 2020

R&D Investments and Idiosyncratic Volatility

Md. Tanvir Hamim

University of Dhaka, Bangladesh

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10.31014/aior.1992.03.03.266

Pages: 1105-1113

Keywords: R&D, Idiosyncratic Volatility, Firm Size, Information Asymmetry

Abstract

This paper investigates how R&D investment intensity can infuse information asymmetry about the growth prospects and the idiosyncratic volatility of non-financial firms. Panel Data Method has been employed in order to regress idiosyncratic volatility on R&D investments. Using a sample of research-intensive FTSE-100 and S&P-100 firms having the highest market capitalization between 2008 and 2017, the study finds the evidence of a positive association in between R&D investment intensity and idiosyncratic component of total stock return volatility. The study provides the insight that R&D-led firms should leverage on their R&D related sensitive information to reduce the level of idiosyncratic volatility.

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