1 Refer to the table below, which presents the average book-to-market ratio and research and development spending for each industry. Book-to-market ratio is defined as book value of common equity divided by market value of common equity at fiscal year-end. R&D spending is calculated as the cumulative R&D expense over the past 10 years divided by total assets. The statistics reported in the table are calculated using financial statement data of all U.S. public companies from 1981 to 2017. Industry Book-to-Market Ratio R&D Expenditure Utilities 1.016 0.01% Finance 0.796 0.02% Telecommunication 0.711 3.34% Energy 0.657 3.38% Manufacturing 0.557 16.47% Chemicals 0.432 19.00% Business Equipment 0.367 39.84% Pharmaceutical 0.270 40.49% Required: Explain why book-to-market ratio and R&D spending are negatively correlated, as shown in the table. Assume market efficiency in your answer. (20 marks)