Product Market Competition, R&D Intensity, and Stock Returns— In Light of a Text Analysis-Based Industry Classification Method (Chinese version)

Abstract

A new industry classification method is applied to all non-financial companies listed in Chinese A share market during 2015-2018 to study the relationship between product market competition, R&D intensity and stock returns. Univariate and bivariate grouped regressions with Fama-French three factors model, Carhart four factors model, and Fama-French five factors model are conducted. The results prove that the positive impact of R&D intensity on stock returns is strongest when product market competition is intense. The rules remain robust with subsamples of state-owned enterprises and private enterprises respectively. By comparing with traditional industry classification methods, the new text analysis-based approach proves to be more informative especially for small market cap firms.