Uncertainty, Investor Sentiment, and Innovation

• 成果类型: Article
• 署名作者: Dicks, David; Fulghieri, Paolo
• 署名单位: Baylor University; University of North Carolina; University of North Carolina Chapel Hill; Center for Economic & Policy Research (CEPR); European Corporate Governance Institute
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhaa065
• 发表日期: 2021
• 页码: 1236
• 关键词: research-and-development; CAPITAL-INVESTMENT; ROBUST-CONTROL; MARKET; MODEL; merger; GROWTH; EFFICIENCY; valuation; ambiguity

摘要

We develop a theory of innovation waves, investor sentiment, and merger activity based on Knightian uncertainty. Uncertainty-averse investors are more optimistic on an innovation when they can make contemporaneous investments in multiple uncertain projects. Innovation waves occur when there is a critical mass of innovative companies, and are characterized by stronger investor sentiment, higher equity valuation, and hot initial public offering markets. Our approach to investor sentiment is not based on erroneous beliefs disjoint from economic fundamentals, but depends on uncertainty on the fundamentals. Our model can explain sector-specific booms uncorrelated with aggregate economic activity and the overall stock market.