Lauren Cohen,  Karl Diether, and Christopher Malloy (2013), published their study in The Review of Financial Studies and showed that a firm’s ability to innovate is predictable, persistent, and relatively simple to compute.  However, usually, investors misvalue stocks when they take past success as benchmarks for future success. They further show that a long-short portfolio strategy that takes advantage of the information in past track records earns abnormal returns of roughly 11 percent per year.

Our Stata Code

We have developed easy to use yet robust codes for replicating tables in the above paper.  The codes need just a basic understanding of Stata. Further, our comments with each line of code will surely help you to not only apply the code but also understand the process more clearly.


Code for any 4 models (variations) is available for $299, plus a $50 for raw data processing (in case the data is not in Stata format and variables are not already constructed). For further details, please contact us at:


  1. Cohen, L., Diether, K., & Malloy, C. (2013). Misvaluing innovation. The Review of Financial Studies26(3), 635-666.