More Than Words: Quantifying Language to Measure Firms' Fundamentals

Paul C. Tetlock, Maytal Saar‐tsechansky and Sofus Macskassy

Journal of Finance, 2008, vol. 63, issue 3, 1437-1467

Abstract: We examine whether a simple quantitative measure of language can be used to predict individual firms' accounting earnings and stock returns. Our three main findings are: (1) the fraction of negative words in firm‐specific news stories forecasts low firm earnings; (2) firms' stock prices briefly underreact to the information embedded in negative words; and (3) the earnings and return predictability from negative words is largest for the stories that focus on fundamentals. Together these findings suggest that linguistic media content captures otherwise hard‐to‐quantify aspects of firms' fundamentals, which investors quickly incorporate into stock prices.

Date: 2008
References: Add references at CitEc
Citations: View citations in EconPapers (642)

Downloads: (external link)
https://doi.org/10.1111/j.1540-6261.2008.01362.x

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:63:y:2008:i:3:p:1437-1467

Ordering information: This journal article can be ordered from
http://www.afajof.org/membership/join.asp

Access Statistics for this article

More articles in Journal of Finance from American Finance Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().