Speculative and Informative: Lessons from Market Reactions to Speculation Cues

66 Pages Posted: 3 Apr 2018 Last revised: 3 Jan 2024

See all articles by J. Anthony Cookson

J. Anthony Cookson

University of Colorado at Boulder - Leeds School of Business

S. Katie Moon

University of Colorado at Boulder - Leeds School of Business

Joonki Noh

Case Western Reserve University - Department of Banking & Finance

Date Written: December 31, 2023

Abstract

Speculative language in corporate disclosures can convey valuable information on firms’ fundamentals. We evaluate this idea by developing a measure for speculative statements based on sentences marked with the "weasel tag" on Wikipedia. In the 16-week test period after filing, greater use of speculative statements in 10-Ks predicts higher and non-reverting abnormal returns, more insider and informed buying, and higher news sentiment. These findings imply that managers' usage of speculative language in 10-Ks reflects voluntary disclosure of their private information about the positive prospects of events when market implications of the events are uncertain and thus have room for (re)interpretation.

Keywords: Textual Analysis, 10-K Filings, Wikipedia, Weasel Words, Speculative language, Market Reactions, Information Asymmetry, Informed Trading Activity, News Sentiment

Suggested Citation

Cookson, J. Anthony and Moon, Katie and Noh, Joonki, Speculative and Informative: Lessons from Market Reactions to Speculation Cues (December 31, 2023). Available at SSRN: https://ssrn.com/abstract=3152460 or http://dx.doi.org/10.2139/ssrn.3152460

J. Anthony Cookson

University of Colorado at Boulder - Leeds School of Business ( email )

Boulder, CO 80309-0419
United States

Katie Moon (Contact Author)

University of Colorado at Boulder - Leeds School of Business ( email )

Boulder, CO 80309-0419
United States

Joonki Noh

Case Western Reserve University - Department of Banking & Finance ( email )

10900 Euclid Ave.
Cleveland, OH 44106-7235
United States
216-368-3737 (Phone)

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