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Word power: A new approach for content analysis

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  • Jegadeesh, Narasimhan
  • Wu, Di
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    Abstract

    We present a new approach for content analysis to quantify document tone. We find a significant relation between our measure of the tone of 10-Ks and market reaction for both negative and positive words. We also find that the appropriate choice of term weighting in content analysis is at least as important as, and perhaps more important than, a complete and accurate compilation of the word list. Furthermore, we show that our approach circumvents the need to subjectively partition words into positive and negative word lists. Our approach reliably quantifies the tone of IPO prospectuses as well, and we find that the document score is negatively related to IPO underpricing.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Financial Economics.

    Volume (Year): 110 (2013)
    Issue (Month): 3 ()
    Pages: 712-729

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    Handle: RePEc:eee:jfinec:v:110:y:2013:i:3:p:712-729

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    Web page: http://www.elsevier.com/locate/inca/505576

    Related research

    Keywords: Content analysis; Lexicons; Term weighting;

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    1. Tim Loughran & Bill Mcdonald, 2011. "When Is a Liability Not a Liability? Textual Analysis, Dictionaries, and 10‐Ks," Journal of Finance, American Finance Association, vol. 66(1), pages 35-65, 02.
    2. Paul C. Tetlock, 2007. "Giving Content to Investor Sentiment: The Role of Media in the Stock Market," Journal of Finance, American Finance Association, vol. 62(3), pages 1139-1168, 06.
    3. Kathleen Weiss Hanley, 2010. "The Information Content of IPO Prospectuses," Review of Financial Studies, Society for Financial Studies, vol. 23(7), pages 2821-2864, July.
    4. Werner Antweiler & Murray Z. Frank, 2004. "Is All That Talk Just Noise? The Information Content of Internet Stock Message Boards," Journal of Finance, American Finance Association, vol. 59(3), pages 1259-1294, 06.
    5. Feng Li, 2010. "The Information Content of Forward-Looking Statements in Corporate Filings-A Naïve Bayesian Machine Learning Approach," Journal of Accounting Research, Wiley Blackwell, vol. 48(5), pages 1049-1102, December.
    6. Tinic, Seha M, 1988. " Anatomy of Initial Public Offerings of Common Stock," Journal of Finance, American Finance Association, vol. 43(4), pages 789-822, September.
    7. Rock, Kevin, 1986. "Why new issues are underpriced," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 187-212.
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