Reading between the lines: An empirical examination of qualitative attributes of financial analysts’ reports

What do they mean? Using Media Richness as an Indicator for the Information Value of Stock Analyst Opinion regarding post-earnings Firm Performance

“…Even when these reports explained much less of the variance within abnormal returns in this study. Also, as also shown by other studies [1,2,5,21,35], the presented analysis reinforces the crucial effect of call and report tone towards investor reaction. The theoretical contribution of this study is twofold.…”

Evidence on the Information Content of Text in Analyst Reports

“…6 The naïve Bayes approach achieves a classification accuracy of 80.9 percent in the in-sample validation and 76.9 percent in the out-of-sample validation, which is substantially higher than that achieved using dictionary-based content analysis approaches based on the general dictionaries (48. text. Our study offers a more definitive answer to the value of analyst report text than previous studies (Asquith et al 2005;Twedt and Rees 2012) for several reasons. First, our sample provides greater confidence in the generalizability of our results.…”

“…Because these celebrity analysts have greater impacts on the market (Gleason and Lee 2003;Stickel 1992), their results may not be generalizable to reports issued by non-star analysts. Twedt and Rees (2012) study initiation reports issued by analysts in 2006. An initiation report is the first report issued by an analyst when she decides to cover a company; hence, their results could be partially explained by analysts' coverage decisions (McNichols and O'Brien 1997).…”

“…Huang, Lehavy, Zang, and Zheng (2014) compare the thematic content of analyst report text with that of the earnings conference call transcripts and find that analysts serve as both the information interpretation role and the information discovery role immediately after the conference calls. 2154 Huang, Zang, andZheng Twedt andRees (2012) use a dictionary approach to assess the tone of 2,057 initiation reports issued in 2006. They find that, conditional on earnings forecasts and stock recommendations, the market reacts positively to the textual tone of initiation reports.…”

The use of intellectual capital information by sell-side analysts in company valuation

“…Research evidence suggests that investors recognise the importance of narrative information in analyst reports. The market reacts to the strength and quality of arguments and the tone and level of detail in analyst reports (Hirst et al, 1995, Asquith et al, 2005, Twedt and Rees, 2012. Among the narratives in analyst reports are information about company IC and other types of non-financial information (Flöstrand and Ström, 2006, García-Meca and Martínez, 2007, Orens and Lybaert, 2007, Abhayawansa and Guthrie, 2014.…”