Innovative Efficiency Tilt
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.
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
Companies whose patent filing rate is accelerating are investing more in innovation -- and the market is slow to price that in.
Companies where the economic value of each new patent is rising (not just the count) compound innovation quality in a way the market underprices.
Explore Innovative Efficiency Tilt on alphactor.ai
See which tickers this family is currently firing on, with live signals and rankings.