Future profitability and stock returns of innovative firms in Australia

This paper examines the impact of innovation on future profitability and stock returns. We first replicate confirm findings Hirshleifer et al. (2018) in U.S. setting. Consistent with we find that is associated with: (1) higher more persistent suggesting innovative firms are able to maintain a competitive advantage (2) positive returns mispricing current share prices. When extend these analyses Australian setting continue experienced sustained but unlike no evidence mispricing. argue general paucity Australia two-tier registration system which allows investors differentiate between quality patents, enable better price innovation.