Patents to RD expenses
✗ deadPatentsRDOther· Other data
Drop obs before 1975. Set expenses for research and development (xrd) and number of patents (npat) to 0 if missing. Calculate Patents to RD as patents in a year divided by $xrd_{t-2} + .8 xrd_{t-3} + .6 xrd_{t-4} + .4xrd_{t-5} + .2 xrd_{t-6}$. Drop if denominator = 0, 2 years or less in Compustat, sic in 6000s, ceq < 0. Double independent sort using (a) size NYSE median (b) terciles of Patents to RD. Long if in small size, highest tercile of Patents to RD, short if in small size, smallest tercile.
IS Sharpe (1977–2012)
0.194
+2.6% p.a.
OOS Sharpe (2013–2023)
-1.022
-60.7% p.a.
Sharpe decay
+626.8%
(IS − OOS) / |IS|
IS vol
13.4%
annualized
Cumulative return (last 40 years, monthly)
-95%1983-012023-06
Publication details
AuthorsHirschleifer, Hsu and Li
PaperHirschleifer, Hsu and Li (2013)
JournalJournal of Financial Economics
Publication year2013
Original sample1982–2008
IS T-statistic4.13
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