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Patent Class Peer Spillover

Updated monthlyData needs: highlong only

2013

Hirshleifer-Hsu-Li 2013 JFE + Cohen-Diether-Malloy 2013 RFS.

In plain terms

When a peer in our tech cluster has a patent surge, we go long because the innovation tailwind tends to lift the whole class over the next 1-6 months.

How it works

Firms in the same patent-tech cluster as a leader benefit when the leader patent intensity surges. Cross-firm innovation premium under-prices the second-order beneficiary.

Live results

0 times picked on its own · 156 times inside a blend (136 beat the stock) · updated 2026-06-06

This strategy is a frequent ingredient in blends that combine a few strategies on one stock. It has contributed to 156 such blended picks (136 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.
Tnic peers
Hoberg-Phillips text-based industry classification peer lists (annual).
Patent innovation value
Kogan-Papanikolaou-Seru-Stoffman patent dollar-value series.

Expected edge

Reported return: 12-15%/yr top decile (own-firm)
Tested over: 1981-2008 (Hirshleifer-Hsu-Li)

12-15%/yr top decile (Hirshleifer-Hsu-Li 2013); cross-firm channel typically ~half.

Related families

Patent Innovation PremiumReal-World & Alternative Data

Markets under-react when companies are granted high-value patents (measured by 3-day stock reaction at grant). Firms with valuable recent patents outperform by 3-5%/yr.

Patent Class DriftReal-World & Alternative Data

When a company's patent portfolio shifts into new technology classes (e.g. legacy hardware -> AI), it's signaling a real pivot. The stock outperforms over the next 1-2 years.

TNIC Momentum SpilloverPrice & Market Behavior

The 1-month lagged return of a stock's text-similarity peer basket (TNIC, crosses sectors) predicts the focal stock's next-month return.

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