Abstract
The complexity of innovation information often results in investors' cognitive bias, manifesting as an imbalance in the significance attributed to innovation quantity versus innovation quality. Based on investor cognitive bias, this paper explores the problem of innovation pricing in China's A-share market. Empirical findings indicate that cognitive bias creates a premium, primarily driven by mispricing. Moreover, we contend that mispricing originates from the innovation information environment and firms' innovation strategy. Our heterogeneity analysis indicates that the cognitive bias premium is more pronounced in high-tech industries, firms with lower market capitalization, and those facing stronger financial constraints.
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