| Creators: |
Drechsler, Katharina and Müller, Sebastian and Wagner, Heinz-Theo |
| Title: |
Digital innovation…and the cross-section of stock returns |
| Item Type: |
Conference or Workshop Item |
| Event Title: |
28th Annual Meeting of the German Finance Association (DGF) ; Submission 289 |
| Event Location: |
Marburg, Germany |
| Event Dates: |
29. September - 1. Oktober 2022 |
| Projects: |
IDI |
| Date: |
2022 |
| Divisions: |
Informationsmanagement |
| Abstract (ENG): |
Based on validated word lists from the Information Systems literature, we use the MD&A section of annual firm
reports to construct a text-based measure of digital innovation. In our sample period from 1996 to 2020, we find
that firms with a high level of digital innovation are systematically different from low-level firms along several key
characteristics like valuation, sales growth, and profitability. A digital innovation factor, which is long (short) stocks
with high (low) digital innovation, earns an equally weighted (value-weighted) monthly six-factor alpha of 0.92%
(0.50%) per month, both statistically significant at 1%. Differences in firm characteristics and abnormal returns
are not explained by industry affiliation. Additional tests suggests that digital innovation is a priced risk factor,
which should be added to existing asset pricing models. |
| Forthcoming: |
No |
| Language: |
German |
| Citation: |
Drechsler, Katharina and Müller, Sebastian and Wagner, Heinz-Theo
(2022)
Digital innovation…and the cross-section of stock returns.
In: 28th Annual Meeting of the German Finance Association (DGF) ; Submission 289, 29. September - 1. Oktober 2022, Marburg, Germany.
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