We show that firms’ prior innovation activity is positively related to the market value of the firm measured immediately prior to a new product announcement while negatively related to announcement-date returns, consistent with the notion that these returns only measure an update from previously-set investor expectations. We also measure the long-term stock performance of firms in relation to their unexpected innovation output and find a positive relationship between performance and output; the opposite of what we find in the case of announcement-day CARs. Les mer her