The Pessimism Factor: SEC EDGAR Form 10-K Textual Analysis and Stock Returns

41 Pages Posted: 6 Jul 2015

Date Written: July 6, 2015

Abstract

I perform textual analysis on 20,000 annual SEC 10-K Forms, for NYSE, NASDAQ and AMEX stocks, from 1992 until 2015. The textual analysis negative (pessimism) percentage per se, as used in the previous literature, is not a significant determinant of future stock returns. But, monthly portfolios based on the product of annual pessimism change and the previous period returns generate returns in excess of previous winners/losers. Nine months after the filing, the difference is higher than 5%, while it surpasses 7% twelve months after the filing. Negative (positive) previous returns along with positive pessimism changes lead to positive (negative) returns.

Keywords: SEC Form 10-K, Textual Analysis, Financial Sentiment, NYSE, NASDAQ, AMEX (NYSE MKT)

JEL Classification: G10, G14

Suggested Citation

Chouliaras, Andreas, The Pessimism Factor: SEC EDGAR Form 10-K Textual Analysis and Stock Returns (July 6, 2015). Available at SSRN: https://ssrn.com/abstract=2627037 or http://dx.doi.org/10.2139/ssrn.2627037

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