INNOVATION a: WHAT DO STOCK PRICE INDEXES OF IP-INTENSIVE COMPANIES TELL US ABOUT INNOVATION?
Principal Investigator(s): View help for Principal Investigator(s) Carol Corrado, The Conference Board; David Martin, M-CAM International, LLC; Qianfan Wu, M-CAM International, LLC
Version: View help for Version V1
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Project Citation:
Corrado, Carol, Martin, David , and Wu, Qianfan. INNOVATION a: WHAT DO STOCK PRICE INDEXES OF IP-INTENSIVE COMPANIES TELL US ABOUT INNOVATION? Nashville, TN: American Economic Association [publisher], 2020. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2020-05-15. https://doi.org/10.3886/E117423V1
Project Description
Summary:
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Abstract:
Stock prices are a leading indicator of economic activity in the United States, e.g., they are a component of The Conference Board’s U.S. Leading Economic Index. This paper re-examines stock prices and business productivity in light of the growing importance of intangible investment in overall investment in recent decades (Corrado and Hulten, 2010; Haskel and Westlake, 2017). The new information brought to bear in this paper is the M·CAM database (Martin 2004, 2013; Luse and Martin 2014). This database includes traditional full-text patent and other IP data (such as state-granted rights) and includes both explicit citation information together with implicit conceptual association calculated using M·CAM’s proprietary linguistic genomic algorithms that provide estimates of the uniqueness, quality, and value chain associations of patents across companies. The M·CAM database is used to estimate a stock price index of companies determined to have the strongest ties between their holdings of intangible assets and the company’s future profitability. We find that (a) the intangibles-driven stock price index is 10 percent higher than the S&P 500 since its real-time inception in July 2015 and greatly outperforms the S&P 500 over its backcasted history, which extends to July 2007; (b) IP and other innovation assets are essential business assets of over 70 percent of the Standard & Poors 500 and the Russell 1000; and (c) that M·CAM’s sector-level IP data are “value added” indicators of the sector’s technological capability vis a vis “raw” indicators such as WIPO or USPTO patent counts
Stock prices are a leading indicator of economic activity in the United States, e.g., they are a component of The Conference Board’s U.S. Leading Economic Index. This paper re-examines stock prices and business productivity in light of the growing importance of intangible investment in overall investment in recent decades (Corrado and Hulten, 2010; Haskel and Westlake, 2017). The new information brought to bear in this paper is the M·CAM database (Martin 2004, 2013; Luse and Martin 2014). This database includes traditional full-text patent and other IP data (such as state-granted rights) and includes both explicit citation information together with implicit conceptual association calculated using M·CAM’s proprietary linguistic genomic algorithms that provide estimates of the uniqueness, quality, and value chain associations of patents across companies. The M·CAM database is used to estimate a stock price index of companies determined to have the strongest ties between their holdings of intangible assets and the company’s future profitability. We find that (a) the intangibles-driven stock price index is 10 percent higher than the S&P 500 since its real-time inception in July 2015 and greatly outperforms the S&P 500 over its backcasted history, which extends to July 2007; (b) IP and other innovation assets are essential business assets of over 70 percent of the Standard & Poors 500 and the Russell 1000; and (c) that M·CAM’s sector-level IP data are “value added” indicators of the sector’s technological capability vis a vis “raw” indicators such as WIPO or USPTO patent counts
Funding Sources:
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The Conference Board;
M-CAM International, LLC
Scope of Project
Subject Terms:
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Economics;
Finance;
intellectual property
JEL Classification:
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F30 International Finance: General
O34 Intellectual Property and Intellectual Capital
F30 International Finance: General
O34 Intellectual Property and Intellectual Capital
Geographic Coverage:
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Global
Time Period(s):
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1/1/2013 – 9/30/2019
Collection Date(s):
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5/1/2019 – 9/30/2019
Universe:
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Patent and company stock market performance data
Data Type(s):
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other
Methodology
Response Rate:
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We use publicly available patents and stock market performance data for companies around the globe. There is no response rate associated.
Sampling:
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The data is publicly available an there is no sampling issues associated.
Data Source:
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Patent citation data: United State Patent and Trademark Office
Company market performance data: FactSet Research Systems Inc
Company market performance data: FactSet Research Systems Inc
Collection Mode(s):
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other
Scales:
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quantitative and qualitative
Weights:
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No specific weighting strategy is adopted when acquiring the data.
Unit(s) of Observation:
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Company based
Geographic Unit:
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Developed countries
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