IDEAS home Printed from https://ideas.repec.org/a/eee/jfinec/v110y2013i3p712-729.html
   My bibliography  Save this article

Word power: A new approach for content analysis

Author

Listed:
  • Jegadeesh, Narasimhan
  • Wu, Di

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.

Suggested Citation

  • Jegadeesh, Narasimhan & Wu, Di, 2013. "Word power: A new approach for content analysis," Journal of Financial Economics, Elsevier, vol. 110(3), pages 712-729.
    • Handle: RePEc:eee:jfinec:v:110:y:2013:i:3:p:712-729
    DOI: 10.1016/j.jfineco.2013.08.018
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0304405X13002328
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jfineco.2013.08.018?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. 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.
    2. 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.
    3. Rock, Kevin, 1986. "Why new issues are underpriced," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 187-212.
    4. 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.
    5. 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, June.
    6. 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, June.
    7. 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, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Thomas Boulton & Bill B. Francis & Thomas Shohfi & Daqi Xin, 2021. "Investor awareness or information asymmetry? Wikipedia and IPO underpricing," The Financial Review, Eastern Finance Association, vol. 56(3), pages 535-561, August.
    2. Buehlmaier, Matthias M. M. & Zechner, Josef, 2016. "Financial media, price discovery, and merger arbitrage," CFS Working Paper Series 551, Center for Financial Studies (CFS).
    3. Yan, Yumeng & Xiong, Xiong & Meng, J. Ginger & Zou, Gaofeng, 2019. "Uncertainty and IPO initial returns: Evidence from the Tone Analysis of China’s IPO Prospectuses," Pacific-Basin Finance Journal, Elsevier, vol. 57(C).
    4. Hanley, Kathleen Weiss & Hoberg, Gerard, 2012. "Litigation risk, strategic disclosure and the underpricing of initial public offerings," Journal of Financial Economics, Elsevier, vol. 103(2), pages 235-254.
    5. Ingrid E. Fisher & Margaret R. Garnsey & Mark E. Hughes, 2016. "Natural Language Processing in Accounting, Auditing and Finance: A Synthesis of the Literature with a Roadmap for Future Research," Intelligent Systems in Accounting, Finance and Management, John Wiley & Sons, Ltd., vol. 23(3), pages 157-214, July.
    6. Jiao Ji & Oleksandr Talavera & Shuxing Yin, 2018. "The Hidden Information Content: Evidence from the Tone of Independent Director Reports," Working Papers 2018-28, Swansea University, School of Management.
    7. Thomas Renault, 2020. "Sentiment analysis and machine learning in finance: a comparison of methods and models on one million messages," Digital Finance, Springer, vol. 2(1), pages 1-13, September.
    8. Gerard Hoberg & S. Katie Moon, 2019. "The Offshoring Return Premium," Management Science, INFORMS, vol. 67(6), pages 2876-2899, June.
    9. Chouliaras, Andreas, 2015. "High Frequency Newswire Textual Sentiment: Evidence from international stock markets during the European Financial Crisis," MPRA Paper 62524, University Library of Munich, Germany.
    10. Yan, Shan, 2015. "Managerial attitudes and takeover outcomes: Evidence from corporate filings," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 35(C), pages 30-44.
    11. Christina Bannier & Thomas Pauls & Andreas Walter, 2019. "Content analysis of business communication: introducing a German dictionary," Journal of Business Economics, Springer, vol. 89(1), pages 79-123, February.
    12. Simon Fritzsch & Philipp Scharner & Gregor Weiß, 2021. "Estimating the relation between digitalization and the market value of insurers," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 88(3), pages 529-567, September.
    13. Carretta, Alessandro & Farina, Vincenzo & Fiordelisi, Franco & Schwizer, Paola & Stentella Lopes, Francesco Saverio, 2015. "Don’t Stand So Close to Me: The role of supervisory style in banking stability," Journal of Banking & Finance, Elsevier, vol. 52(C), pages 180-188.
    14. Chouliaras, Andreas, 2016. "The Effect of Infomation on Financial Markets: A Survey," MPRA Paper 71396, University Library of Munich, Germany.
    15. Deng, Xiaohu & Gao, Lei, 2018. "Annual report "Graphicity" and stock returns," Working Papers 2018-08, University of Tasmania, Tasmanian School of Business and Economics.
    16. Miwa, Kotaro, 2022. "The informational role of analysts’ textual statements," Research in International Business and Finance, Elsevier, vol. 59(C).
    17. Fuxiu Jiang & Kenneth A. Kim & Yunbiao Ma & John R. Nofsinger & Beibei Shi, 2019. "Corporate Culture and Investment–Cash Flow Sensitivity," Journal of Business Ethics, Springer, vol. 154(2), pages 425-439, January.
    18. Kothari, Pratik & Chance, Don M. & Ferris, Stephen P., 2021. "Bragging rights: Does corporate boasting imply value creation?," Journal of Corporate Finance, Elsevier, vol. 67(C).
    19. Fengler, Matthias & Phan, Minh Tri, 2023. "A Topic Model for 10-K Management Disclosures," Economics Working Paper Series 2307, University of St. Gallen, School of Economics and Political Science.
    20. Daniele Ballinari & Simon Behrendt, 2021. "How to gauge investor behavior? A comparison of online investor sentiment measures," Digital Finance, Springer, vol. 3(2), pages 169-204, June.

    More about this item

    Keywords

    Content analysis; Lexicons; Term weighting;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G19 - Financial Economics - - General Financial Markets - - - Other

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jfinec:v:110:y:2013:i:3:p:712-729. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505576 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.