Strategies · Core
R&D Expenditures and Stock Returns
Long high R&D (scaled by assets or market) names and short low-R&D — a capitalized-intangibles / innovation sort.
Definition
Sort on R&D/assets or R&D/ME. Long high, short low. Accounting expensing of R&D makes some ‘low earnings’ names look cheap; this sort is the other side. Industry clustering (pharma, tech) is extreme.
Why it matters
It is how you stop value from shorting the lab. Also how you load a sector bet.
Case
A high R&D biotech book that is a binary-event portfolio. The factor average hides the lottery.
How to read it
Industry-neutral or not. Scaled by assets vs sales vs ME. Zero-R&D financials should be out of the universe.
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