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Analyst Report Readability

49 Pages Posted: 28 Jun 2011 Last revised: 11 May 2013

Gus De Franco

Tulane University - A.B. Freeman School of Business

Ole-Kristian Hope

University of Toronto - Rotman School of Management

Dushyantkumar Vyas

University of Toronto - Rotman School of Management; University of Toronto at Mississauga

Yibin Zhou

University of Texas at Dallas - School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: May 10, 2013

Abstract

Using an extensive database of 356,463 sell-side equity analysts’ reports from 2002 to 2009, this study is one of the first to analyze the readability of analysts’ reports. We first examine the determinants of variations in analyst report readability. Using several proxies for ability, we show that reports are more readable when issued by analysts with higher ability. Second, we test the relation between analysts’ report readability and stock trading volume reactions. We find that trading volume reactions increase with the readability of analysts’ text, consistent with theoretical models that predict that more precise information (and hence more informative signals) results in investors’ initiating trades. These results support the view that the readability of analysts’ reports is important to analysts and capital market participants.

Keywords: Analyst reports, readability, volume reactions, analyst ability

JEL Classification: G20, G24, G30, M10, M40

Suggested Citation

De Franco, Gus and Hope, Ole-Kristian and Vyas, Dushyantkumar and Zhou, Yibin, Analyst Report Readability (May 10, 2013). Rotman School of Management Working Paper No. 1873424. Available at SSRN: https://ssrn.com/abstract=1873424 or http://dx.doi.org/10.2139/ssrn.1873424

Gus De Franco

Tulane University - A.B. Freeman School of Business ( email )

7 McAlister Drive
New Orleans, LA 70118
United States

Ole-Kristian Hope (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

HOME PAGE: http://www.rotman.utoronto.ca/FacultyAndResearch/Faculty/FacultyBios/Hope.aspx

Dushyantkumar Vyas

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

University of Toronto at Mississauga ( email )

3359 Mississauga Rd N.
Mississauga, Ontario L5L 1C6
Canada

Yibin Zhou

University of Texas at Dallas - School of Management ( email )

2601 N. Floyd Road
Richardson, TX 75080
United States

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