The information content of unexpected stock returns: Evidence from intellectual capital

Yi Mien Lin*, Chih Chen Lee, Chin Fang Chao, Chih Liang Liu

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

6 Scopus citations

Abstract

This paper decomposes a firm's unexpected stock returns (unexpected excess stock returns) into intellectual capital news and expected return news (expected excess stock return news) and develops a variance decomposition model to analyze the factors that cause shocks to stock returns and excess stock returns. We also split intellectual capital into recorded and unrecorded intellectual capital, and investigate the value relevance of expected return news and recorded and unrecorded intellectual capital news.The paper further examines how the U.S. stock market reacts to intellectual capital news and expected return news. The results show that intellectual capital news is the main driver of stock returns and excess stock returns. After decomposing intellectual capital into recorded intellectual capital and unrecorded intellectual capital, unrecorded intellectual capital news is the dominant driver of stock returns and excess stock returns, followed by recorded intellectual capital news. Overall, this study suggests that the U.S. stock market still underreacts to intellectual capital news; especially unrecorded intellectual capital news.

Original languageEnglish
Pages (from-to)208-225
Number of pages18
JournalInternational Review of Economics and Finance
Volume37
DOIs
StatePublished - 1 May 2015

Keywords

  • Expected return news
  • Intellectual capital news
  • Unexpected stock returns
  • Variance decomposition of returns

Fingerprint Dive into the research topics of 'The information content of unexpected stock returns: Evidence from intellectual capital'. Together they form a unique fingerprint.

Cite this