Effects Behind Words: Quantifying Qualitative Information in Corporate Announcements

Financial Management Association (FMA), European Conference 2011, Porto, Portugal

19 Pages Posted: 29 Aug 2012

See all articles by Michael Liebmann

Michael Liebmann

University of Freiburg (Germany)

Michael Hagenau

University of Freiburg

Matthias Häußler

University of Rostock

Dirk Neumann

University of Freiburg

Date Written: May 8, 2011

Abstract

We develop a sentiment metric to analyze the tone and information amount in financial corporate announcements. We improve existing text processing methods by developing a different word selection approach that allows quantifying the sentiment of financial announcements in an intuitive, but effective manner. Applying our approach to corporate announcements, we find, first, that our metric provides superior explanatory power for abnormal returns during the day of the announcement. Second, analyst EPS forecast revisions during the month after the announcement show a significant structural relation to relevant announcement text components based on Tonality. Third, observed short-term stock price reactions immediately following the announcement are less related to EPS forecast revisions than relevant text components, allowing a new perspective on analyzing post-announcement-drift based on direct cause-and-effect relation.

Keywords: sentiment analysis, announcement study, asset pricing, analyst forecast revisions

JEL Classification: G11, G12, G14, G17

Suggested Citation

Liebmann, Michael and Hagenau, Michael and Häußler, Matthias and Neumann, Dirk, Effects Behind Words: Quantifying Qualitative Information in Corporate Announcements (May 8, 2011). Financial Management Association (FMA), European Conference 2011, Porto, Portugal. Available at SSRN: https://ssrn.com/abstract=2136880 or http://dx.doi.org/10.2139/ssrn.2136880

Michael Liebmann (Contact Author)

University of Freiburg (Germany) ( email )

Albert-Ludwigs-Universität Freiburg, Wirtscha.inf.
Kollegiengebäude II, Platz der Alten Synagoge
Freiburg im Breisgau, 79098
Germany
+49-177-321-2626 (Phone)

HOME PAGE: http://www.is.uni-freiburg.de/mitarbeiter/team/michael-liebmann

Michael Hagenau

University of Freiburg ( email )

Platz der alten Synagoge
Freiburg, D-79085
Germany

Matthias Häußler

University of Rostock ( email )

Postfach 10 08 88
Rostock, 18055
Germany

Dirk Neumann

University of Freiburg ( email )

Albert-Ludwigs-Universität Freiburg, Wirtscha.inf.
Kollegiengebäude II, Platz der Alten Synagoge
Freiburg im Breisgau, 79098
Germany

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