Company Events & EarningsExtended setexperimental liveNew

Innovative Efficiency Tilt

Updated monthlyData needs: mediumlong onlylong short

2013

Hirshleifer-Hsu-Li 2013 JFE -- Innovative Efficiency and Stock Returns.

In plain terms

Companies that generate more patents per R&D dollar outperform those that spend heavily on R&D but produce fewer high-value patents.

How it works

Innovative efficiency (patents per dollar of R&D, or KPSS value per dollar of R&D) separates productive innovators from R&D spenders. High IE tilts predict higher future returns and earnings growth; low IE tilts with high R&D spending are overvalued relative to their innovation output.

Live results

0 times picked on its own · 1 times inside a blend (1 beat the stock) · updated 2026-07-06

This strategy is a frequent ingredient in blends that combine a few strategies on one stock. It has contributed to 1 such blended picks (1 of which beat simply holding the stock). Picking it on its own is only one of the ways it shows up.

How its picks scored vs. buy & hold

Each pick is graded on a recent year it was never tuned on, against simply owning the same stock

Where its edge concentrates

Share of picks in each company-size group that beat buy & hold

How often it trades

Active vs. patient. Bars on the left mean it waits for rare setups; bars on the right mean it trades often

Return vs. buy & hold

How much each pick beat or trailed simply owning the stock over the test year (extreme microcap moves trimmed)

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Data dependencies

Daily prices
Adjusted-close OHLCV for every US-listed ticker; primary price feed.
Fundamentals
Quarterly fundamentals (income, balance, cash-flow) from FMP + SEC.
Uspto patent applications
A data feed this strategy reads, refreshed on its normal schedule.
Patent innovation value
Kogan-Papanikolaou-Seru-Stoffman patent dollar-value series.

Expected edge

Reported return: ~6% ann. long-short (Hirshleifer-Hsu-Li)
Tested over: 1981-2009 (Hirshleifer-Hsu-Li)

Innovative efficiency long-short: ~6% ann. in Hirshleifer-Hsu-Li 2013.

Related families

Patent Velocity AccelerationCompany Events & Earnings

Companies whose patent filing rate is accelerating are investing more in innovation -- and the market is slow to price that in.

Kpss Inno Value MomentumCompany Events & Earnings

Companies where the economic value of each new patent is rising (not just the count) compound innovation quality in a way the market underprices.

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