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Stock market returns and the content of annual report narratives

Wisniewski, Tomasz Piotr and Yekini, Liafisu Sina (2015). Stock market returns and the content of annual report narratives. Accounting Forum, 39(4) pp. 281–294.

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DOI (Digital Object Identifier) Link: https://doi.org/10.1016/j.accfor.2015.09.001
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Abstract

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.

Item Type: Journal Item
Copyright Holders: 2015 Elsevier Ltd.
ISSN: 0155-9982
Keywords: content analysis; annual reports; stock market returns
Academic Unit/School: Faculty of Business and Law (FBL) > Business > Department for Accounting and Finance
Faculty of Business and Law (FBL) > Business
Faculty of Business and Law (FBL)
Item ID: 55375
Depositing User: Tomasz Wisniewski
Date Deposited: 11 Jun 2018 15:06
Last Modified: 12 Nov 2019 08:53
URI: http://oro.open.ac.uk/id/eprint/55375
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