Research Interests
Research Interests
Innovation economics, corporate investment, behavioral finance
Innovation economics, corporate investment, behavioral finance
Forthcoming at the Journal of Financial and Quantitative Analysis
We document a strong negative relation between the curvature of stock price paths (i.e., price-path convexity) and future short-horizon returns at both the aggregate and firm levels. This relation obtains regardless of the cumulative return during the convexity estimation period. Using survey-based expectations of short-horizon returns, we provide evidence that the negative relation between convexity and future returns is driven in part by overextrapolation of past short-horizon returns.
Journal of Accounting and Economics, 2022, 74 (1), 101492
We find that small innovators (small firms with recent patent grants) earn higher future returns than small non-innovators. These returns are driven by risk, not underreaction due to information processing costs. Small innovators are riskier because of their reliance on external funding and strategic alliances.
Journal of Financial and Quantitative Analysis, 2022, 57 (8), 2899-2928
I construct a new proxy for Tobin's Q that incorporates the replacement cost of patent capital. This proxy, which I call patent Q, explains up to 31% more variation in investment than the standard proxy for Q and up to 62% more variation in investment than total Q of Peters and Taylor (2017). Controlling for patent Q leads to larger, not smaller, cash flow coefficients.
We study how patent thickets, which are clusters of interdependent patents that raise the cost of using or combining technologies, shape acquisition decisions. Firms are less likely to be acquired when their patents are embedded in external thickets, which exacerbate coordination and bargaining frictions. Conversely, firms are more likely to be acquired when their patents form internal thickets, which mitigate costs by consolidating control over related technologies. When acquirers and targets share an external thicket, acquisition probability rises when acquirers depend on targets but falls when targets depend on acquirers, underscoring the asymmetric role of technological dependence in acquisitions.
Understanding firms' ability to absorb external information is key to predicting which firms benefit most from knowledge spillovers. We construct a firm-level measure of this ability -- absorption intensity -- from external information embedded in firms’ patents. To validate the measure, we exploit the American Inventors Protection Act of 1999 (AIPA), which exogenously increased patent information availability. A triple-difference design shows that firms with higher absorption intensity experience greater post-shock innovation growth when more exposed to the reform. Beyond the AIPA setting, firms with higher absorption intensity exhibit greater innovation output, a higher likelihood of producing valuable and breakthrough patents, and faster growth in R\&D, profitability, and employment. The measure captures a core mechanism of knowledge diffusion and provides a practical tool for studying how information flows shape innovation, firm performance, and the aggregate dynamics of technological change.
We find that house price momentum, defined as positive autocorrelation in aggregate house price changes, is stronger and house price change volatility is weaker when and where mortgage default risk at origination is higher. These facts appear widely, both geographically and temporally, and are difficult to reconcile with existing theories of house price dynamics. To explain these facts, we introduce a model in which lenders use valuations that incorporate information relatively slowly. In equilibrium, prices reflect the valuations used by lenders most when default risk is highest. Our model jointly explains the observed relations between default risk, momentum, and volatility.
We study how patent protection affects venture capital (VC) investment in startups by exploiting the Bilski v. Kappos Supreme Court decision, which unexpectedly narrowed patent eligibility. Using variation in industry exposure to the ruling, we find that more exposed industries experienced larger increases in initial VC investment after the decision. The effect reflects a divergence in investment responses: exposure to Bilski is associated with more investment in startups without patents but less investment in startups with pre-Bilski patents. Our findings suggest that weaker patent protection lowers barriers to VC-backed entry and reallocates capital toward startups previously constrained by incumbent patents.