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Endogenous technological progress and the cross-section of stock returns

By Xiaoji Lin

Abstract

I study the cross-sectional variation of stock returns and technological progress using a dynamic equilibrium model with production. Technological progress is endogenously driven by research and development (R&D) investment and is composed of two parts. One part is devoted to product innovation; the other, to increasing the productivity of physical investment. The latter is embodied in new tangible capital. The model breaks the symmetry assumed in standard models between tangible and intangible capital, in which the accumulation processes of tangible and intangible capital stock do not affect each other. Qualitatively and, in many cases, quantitatively, the model explains well-documented empirical regularities

Topics: HB Economic Theory
Publisher: Elsevier
Year: 2011
DOI identifier: 10.1016/j.jfineco.2011.08.013
OAI identifier: oai:eprints.lse.ac.uk:39009
Provided by: LSE Research Online
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