R&D Progress, stock price volatility, and post-announcement drift: An empirical investigation into biotech firms

  • Bixia Xu


I investigate the effects of R&D progress on the dynamics of stock price volatility and the post announcement drift to provide insights into whether or not and how capital markets react to corporate R&D progress in the context of the biotech industry. I find both stock price volatility and the post announcement drift decrease in R&D progress. More importantly, the decrease is proportional to the increase in the drug development success rate driven by R&D progress. Findings suggest that R&D progress conveys useful risk-relevant information, and plays an important role in explaining stock price volatility change and market anomalies.


R&D progress Stock price volatility Post-announcement drift 


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Copyright information

© Springer Science + Business Media, LLC 2006

Authors and Affiliations

  1. 1.Wilfrid Laurier UniversityWaterlooCanada

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