The Importance of Technology- and Market-Based Assets in Stock Movement
Numerous studies have found that companies' technology- and market-based assets are valued in financial markets (e.g., Bosworth and Rogers, 2001; Cockburn and Griliches, 1988; Connolly and Hirschey, 1988; Greenhalgh and Rogers, 2006a, 2006b; Griliches, 1981; Hall, 1993b; Hall et al., 2005; Hall et al., 2007; Megna and Klock, 1993). These studies assume that publicly listed companies comprise bundles of assets whose values are day by day determined in financial markets (Griliches, 1981). Under the efficient market hypothesis, company values and thus stock prices include all future benefits that companies' assets are expected to generate (Fama, 1970). To identify technology-based assets, patents are regularly employed as they protect companies' technologies and allow researchers to observe companies' research efforts. To proxy market-based assets trademarks can be used, although they have been employed very rarely compared to patents (Mendonça et al., 2004). Trademarks allow companies to bind consumers' experiences to signs or names thereby establishing direct connections with current and prospective customers. Researchers investigating the valuation of intangible assets have regularly employed annual observations of company values because technology- and market-based assets adjust rather slowly. For research questions concerning the valuation of intangible assets, annual observations are thus appropriate. However, this is in contrast to financial markets which move more rapidly as evidenced by high stock volatility (Ariff et al., 1995; Fung, 2006). In financial markets, companies' market capitalizations can change drastically within the course of one year. Investment decisions are made more frequently, often on a weekly or even a daily basis. Of course, these movements are driven not only by companies' fundamentals but also by general macroeconomic influences as well as by investor sentiment128 (Baker and Wurgler, 2006; Pindyck and Rotemberg, 1993). In addition to valuations of companies in financial markets, systematic patterns in the movements of stocks are also interesting for both researchers and investors.
KeywordsFinancial Market Stock Return Product Market Stock Prex European Patent
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