R&D, risks and overreaction in a market with the absence of the book-to-market effect期刊界 All Journals 搜尽天下杂志传播学术成果专业期刊搜索期刊信息化学术搜索

R&D, risks and overreaction in a market with the absence of the book-to-market effect

Authors:	Weifeng Hung Chaoshin Chiao Tung Liang Liao Sheng-Tang Huang

Affiliation:	^aFeng Chia University, Department of Finance, No. 100^, Wenhwa Rd., Seatwen, Taichung 40724, Taiwan ROC;^bNational Dong Hwa University, Department of Finance, No. 1, Sec. 2, Da Hsueh Rd., Shoufeng, Hualien 97401, Taiwan ROC;^cNanya Institute of Technology, Department of Finance, No.414, Sec.3, Jhongshan E. Rd., Jhongli, Taoyuan 32091, Taiwan ROC

Abstract:	Prior studies document that the book-to-market (BM) effect is absent in the Taiwan stock market. Using Taiwanese data covering from 1991 to 2006, we show that, after controlling for the size effect and the Fama and French's (1993) risk factors, the BM effect only exists for those firms with low R&D intensity essentially because these stocks suffer less from investors’ underreaction to R&D investment. The BM effect arises primarily from fundamental reversals acting as a proxy for investors’ overreaction.

Keywords:	JEL classification: G12 G14
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