Innovation Activities Anomaly: Tests of Innovative Efficiency and Insider Trading

• Main Authors: Cheng-Liang Liu, 劉正良
• Other Authors: Shou-Min Tsao
• Format: Others
• Language: zh-TW
• Published: 2005
• Online Access: http://ndltd.ncl.edu.tw/handle/27855337053500769329

碩士 === 中原大學 === 會計研究所 === 93 === This paper intends to explore whether the value of innovation activities in corporations can be precisely reflected on their market prices. Also, is insider trading informative enough to evaluate the quality of innovation activities? The empirical results show that : (1) when we define the innovation activities persistence as the impact on innovation activities over the next period’s earnings. The one-year-ahead persistence of innovation activities for corporations with higher efficiency will be significantly greater than that for corporations with lower efficiency. However, the earnings expectations embedded in the stock prices fail to fully reflect the higher persistence of innovation activities for corporations with higher efficiency, which suggests that the stock market in Taiwan toward innovation activities still holds anomalies. (2)Insider trading is valuable in assessing the quality of innovation activities. The persistence of innovation activities is greater (lower) when accompanied by abnormal insider buying (abnormal selling). Also, the earnings expectations embedded in stock prices will fail to fully reflect the higher (lower) persistence of innovation activities associated with abnormal buying(selling) (3)The trading strategy based on innovation activities anomaly or insider trading generates positive one-year-ahead abnormal returns. One-year-ahead hedge returns to joint trading strategies based on both innovation activities anomaly and insider trading ,will significantly exceed those based on innovation activities anomaly or insider trading alone.