49 Pages Posted: 28 Jun 2011 Last revised: 11 May 2013
Date Written: May 10, 2013
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: 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
By John Graham