Using Patent Citation Indicators to Manage a Stock Portfolio

  • Francis Narin
  • Anthony Breitzman
  • Patrick Thomas


This paper examines the relationship between indicators of technology quality and stock market performance. The purpose of this analysis is to demonstrate how quantitative R&D and technology indicators may be useful tools in the analysis of the stock market. Currently many stock market analysts do not include quantitative technology indicators in their evaluation of companies. The analysis presented in this paper shows how such indicators may be a useful addition to traditional methods of company valuation. The paper describes CHI’s technology value model, and presents the results of this model in terms of stock market returns. The results are divided into three sections, according to how often the model is updated. A comparison is made between portfolios updated on an annual, monthly, and weekly basis. The last of these portfolios is based on an actual investment made by CHI using part of its pension fund. The results of the analysis show that updating the model more often than annually improves its performance. This may be owed to the ability to adjust for price changes in stocks during each year.


Stock Market Pension Fund Patent Citation Annual Model Stock Market Return 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Albert, M., Avery, D., McAllister, P., Narin F. (1991). Direct validation of citation counts as indicators of industrially important patents. Research Policy, 20, 251–259.CrossRefGoogle Scholar
  2. Bhattacharya, S., Constantinides, G. (Eds.). (1989). Theory of valuation: frontiers of modern financial theory, Vol. 1. Totowa: Rowman & Littlefield.Google Scholar
  3. Breitzman, A., Narin, F. (1996). A case for patent citation analysis in litigation. Law Works, 3, 3, March.Google Scholar
  4. Carpenter, M., Narin, F., Woolf, P. (1981). Citation rates to technologically important patents. World Patent Information, 4, 160–163.Google Scholar
  5. Cuthbertson, K. (1996). Quantitative financial economics: stocks, bonds and foreign exchange. Chichester: John Wiley & Sons.Google Scholar
  6. Cutler, D., Poterba, J., Summers, L. (1989). What moves stock prices. Journal of Portfolio Management, 15 (3), 4–12.Google Scholar
  7. Deng, Z., Lev, B., Narin, F. (1999). Science & technology as predictors of stock performance. Financial Analysts Journal, 55, 3, 20–32.Google Scholar
  8. Fama, E., French, K. (1992). The cross section of expected stock returns. Journal of Finance, 47, 427–466.Google Scholar
  9. Griliches, Z. (1990). Patent statistics as economic indicators: A Survey. Journal of Economic Literature, 28, 1661–1707.Google Scholar
  10. Hall, B., Jaffe, A., Trajtenberg M. (1998). Market value and patent citations: a first look. Paper prepared for the Conference on Intangibles and Capital Markets, New York University.Google Scholar
  11. Lev, B., Sougiannis, T. (1996). The capitalization, amortization, and value-relevance of R&D. Journal of Accounting and Economics, 21, 107–138.CrossRefGoogle Scholar
  12. Lev B., Zarowin, P. (1998). The boundaries or financial reporting and how to extend them. Presented at The Conference on Intangibles and Capital Markets, New York University, May 13.Google Scholar
  13. McNees, S. (1992). How large are economic forecast errors, New England Economic Review, July/August, 25–42.Google Scholar
  14. Narin, F. (1999). Tech-Line® background paper. In J. Tidd (Ed.), Measuring strategic competence. Imperial College Press, Technology Management Series.Google Scholar
  15. Narin, F., Hamilton, K., Olivastro, D. (1997). The increasing linkage between U.S. technology and public science. Research Policy, 26 (3), 317–330.CrossRefGoogle Scholar
  16. Narin, F., Noma, E., Perry R. (1987). Patents as indicators of corporate technological strength. Research Policy, 16, 143–155.CrossRefGoogle Scholar
  17. O’Shaughnessy, J. (1997). What works on Wall Street. New York: McGraw-Hill.Google Scholar
  18. Rosenberg, N., Birdzell L, Jr. (1990). Science, technology and the Western Miracle. Scientific American, 263 (5), 42–54.Google Scholar
  19. Thomas, P. (2001). A relationship between technology indicators and Stock market performance. Scientometrics, 51 (1), 319–333.CrossRefGoogle Scholar
  20. Thomas, P. (1999). The effect of technological impact upon patent renewal decisions. Technology Analysis & Strategic Management, 11 (2), 181–1997.CrossRefGoogle Scholar
  21. Trajtenberg, M. (1990). A penny for your quotes: patent citations and the value of innovations. Rand Journal of Economics, 21, 172–187.Google Scholar

Copyright information

© Kluwer Academic Publishers 2004

Authors and Affiliations

  • Francis Narin
    • 1
  • Anthony Breitzman
    • 1
  • Patrick Thomas
    • 1
  1. 1.CHI Research, IncHaddon HeightsUSA

Personalised recommendations