Stock returns and future tense language in 10-K reports

Rasa Karapandza

Journal of Banking & Finance, 2016, vol. 71, issue C, 50-61

Abstract: This paper shows that firms talking less about the future in their annual reports generate positive abnormal returns of about 5% annually. I measure how much companies talk about the future in their annual 10-K reports by the frequency of the verbs will, shall, and going to. The evidence favors a risk-based interpretation: firms that use less future tense in their report offer higher returns since they are riskier. These results are consistent with finance theories stating that investors need to be rewarded for holding stocks of firms that put less information about the future in the marketplace.

Keywords: Anomalies; Asset pricing; Text analysis (search for similar items in EconPapers)
JEL-codes: D82 D83 G11 G12 G14 G3 M48 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:71:y:2016:i:c:p:50-61

DOI: 10.1016/j.jbankfin.2016.04.025

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