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Adcock, C., Hua, X., Mazouz, K. et al. (1 more author) (2014) Does the stock market reward innovation? European stock index reaction to negative news during the global financial crisis. Journal of International Money and Finance, 49 (Part B). 470 - 491. ISSN 0261-5606
Abstract
This study uses data on 27 European stock indices over the period from January 2007 to December 2012 to investigate the relationship between innovations and the market reaction to negative news during the financial crisis. We use the bivariate BEKK-GARCH approach to estimate time-varying betas and abnormal returns. We show that index prices of countries in the high (low) innovation groups experience significantly positive (negative) abnormal returns on and following the negative news announcement dates. We also find that index beta changes following the arrival of bad news is negatively associated with a country's innovativeness. This finding suggests that innovations promote economic stability and enhance investors' confidence in a country's ability to cope during difficult times. Thus, policy makers who are concerned with sustainable growth should encourage R&D investments by adopting effective policies and avoid unnecessary cuts in R&D expenditures even during times of crisis. A study of the pre-crisis period from January 2001 to December 2006, using the same methods, indicates that investors value innovation more during difficult times.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2014 Elsevier. This is an author produced version of a paper subsequently published in Journal of International Money and Finance. Uploaded in accordance with the publisher's self-archiving policy. |
Keywords: | Innovation; R&D investments; Stock price reaction; Time-varying betas |
Dates: |
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Institution: | The University of Sheffield |
Academic Units: | The University of Sheffield > Faculty of Social Sciences (Sheffield) > Management School (Sheffield) |
Depositing User: | Symplectic Sheffield |
Date Deposited: | 22 Dec 2014 11:01 |
Last Modified: | 24 Mar 2018 18:10 |
Published Version: | http://dx.doi.org/10.1016/j.jimonfin.2014.06.004 |
Status: | Published |
Publisher: | Elsevier Ltd |
Refereed: | No |
Identification Number: | 10.1016/j.jimonfin.2014.06.004 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:82549 |
Available Versions of this Item
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Does the stock market reward innovation? European stock index reaction to negative news during the global financial crisis. (deposited 08 Dec 2014 11:53)
- Does the stock market reward innovation? European stock index reaction to negative news during the global financial crisis. (deposited 22 Dec 2014 11:01) [Currently Displayed]