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Stock Market Returns and the Content of Annual Report Narratives

journal contribution
posted on 2015-10-13, 09:10 authored by Tomasz Piotr Wisniewski, L. S. Yekini
This paper uses the tools of computational linguistics to analyze the qualitative part of annual reports of UK listed companies. More specifically, the frequency of words associated with different language indicators is used to forecast future stock returns. We find that two of these indicators, capturing ‘activity’ and ‘realism’, predict subsequent price increases, even after controlling for a wide range of factors. Elevated values of these two linguistic variables, however, are not symptomatic of exacerbated risk. Consequently, investors are advised to peruse annual report narratives, as they contain valuable information that may not yet have been discounted in the prices.

History

Citation

Accounting Forum, 2015 (In press)

Author affiliation

/Organisation/COLLEGE OF SOCIAL SCIENCES, ARTS AND HUMANITIES/School of Management

Version

  • AM (Accepted Manuscript)

Published in

Accounting Forum

Publisher

Elsevier

issn

0155-9982

Acceptance date

2015-09-20

Copyright date

2015

Available date

2018-10-09

Publisher version

http://www.sciencedirect.com/science/article/pii/S0155998215000447

Notes

The file associated with this record is under a 36-month embargo from publication in accordance with the publisher's self-archiving policy, available at http://www.elsevier.com/about/company-information/policies/sharing. The full text may be available in the publisher links provided above.

Language

en

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