Transcription of When Is a Liability Not a Liability? Textual Analysis ...
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When Is a Liability Not a Liability? Textual Analysis ...
THE JOURNAL OF FINANCE VOL. LXVI, NO. 1 FEBRUARY 2011 When Is a Liability Not a Liability ? TextualAnalysis, Dictionaries, and 10-KsTIM LOUGHRAN and BILL MCDONALD ABSTRACTP revious research uses negative word counts to measure the tone of a text. We showthat word lists developed for other disciplines misclassify common words in financialtext. In a large sample of 10-Ks during 1994 to 2008, almost three-fourths of the wordsidentified as negative by the widely used Harvard Dictionary are words typically notconsidered negative in financial contexts. We develop an alternative negative wordlist, along with five other word lists, that better reflect tone in financial text. We linkthe word lists to 10-K filing returns, trading volume, return volatility, fraud, materialweakness, and unexpected BODYof finance and accounting research uses Textual Analysis toexamine the tone and sentiment of corporate 10-K reports, newspaper arti-cles, press releases, and investor message boards.
by managers’ vocal signatures. Although we focus on the more common word categorization (bag of words) ... 2 Modal verbs are used to express possibility (weak) and necessity (strong). We extend this ... approach over a word categorization one, arguing that categorization might have low power for corporate filings because “there is no ...
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