R&D Investments and Idiosyncratic Volatility

This paper investigates how R&D investment intensity can infuse information asymmetry about the growth prospects and the idiosyncratic volatility of non-financial firms. Panel Data Method has been employed in order to regress idiosyncratic volatility on R&D investments. Using a sample of research-intensive FTSE-100 and S&P-100 firms having the highest market capitalization between 2008 and 2017, the study finds the evidence of a positive association in between R&D investment intensity and idiosyncratic component of total stock return volatility. The study provides the insight that R&D-led firms should leverage on their R&D related sensitive information to reduce the level of idiosyncratic volatility