50 Pages Posted: 18 Mar 2011 Last revised: 15 Jul 2013
Date Written: July 1, 2013
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.
Keywords: Content analysis, 10-Ks, Filing date, term-weighting
JEL Classification: G10, G14
Suggested Citation: Suggested Citation
Jegadeesh, Narasimhan and Wu, Di (Andrew), Word Power: A New Approach for Content Analysis (July 1, 2013). Journal of Financial Economics (JFE), Forthcoming; AFA 2012 Chicago Meetings Paper. Available at SSRN: https://ssrn.com/abstract=1787273 or http://dx.doi.org/10.2139/ssrn.1787273
By Andrew Ang