Abstract

http://ssrn.com/abstract=2467519
 


 



The Use of Word Lists in Textual Analysis


Tim Loughran


University of Notre Dame

Bill McDonald


University of Notre Dame - Mendoza College of Business - Department of Finance

July 17, 2014


Abstract:     
A commonly-used platform to assess the tone of business documents in the extant accounting and finance literature is Diction. We argue that Diction is inappropriate for gauging the tone of financial disclosures. About 83% of the Diction optimistic words and 70% of the Diction pessimistic words appearing in a large 10-K sample are likely misclassified. Frequently occurring Diction optimistic words like respect, security, power, and authority will not be considered positive by readers of business documents. Similarly, over 45% of the Diction pessimistic 10-K word-counts are not and no. The Loughran-McDonald (2011) dictionary appears better at capturing tone in business text than Diction.

Number of Pages in PDF File: 33

Keywords: Diction; word lists; sentiment analysis; Form 10-Ks; textual analysis.

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Date posted: July 17, 2014  

Suggested Citation

Loughran, Tim and McDonald, Bill, The Use of Word Lists in Textual Analysis (July 17, 2014). Available at SSRN: http://ssrn.com/abstract=2467519 or http://dx.doi.org/10.2139/ssrn.2467519

Contact Information

Tim Loughran (Contact Author)
University of Notre Dame ( email )
Department of Finance
245 Mendoza College of Business
Notre Dame, IN 46556-5646
United States
574-631-8432 (Phone)
574-631-5255 (Fax)
Bill McDonald
University of Notre Dame - Mendoza College of Business - Department of Finance ( email )
P.O. Box 399
Notre Dame, IN 46556-0399
United States
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