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Misvaluing Effective Investors In Intangible Capital, Dustin Lind
Misvaluing Effective Investors In Intangible Capital, Dustin Lind
CMC Senior Theses
Cohen et al. (2013) measure a firm’s ability at investing in knowledge capital, a type of intangible capital, through a model that captures how well a firm translates R&D intensity into future sales growth. Using this model, they show that an investment portfolio comprised of firms that have high R&D spending ability and high R&D intensity earn significant positive abnormal returns. I modify their model to capture a broader investment in intangible capital by replacing R&D intensity with SG&A intensity and substituting sales growth with gross profit growth. My measure of ability at investing in intangible capital has two main …