Topic Tones of Analyst Reports and Stock Returns: A Deep Learning Approach

45 Pages Posted: 20 Aug 2018 Last revised: 20 May 2021

See all articles by Hitoshi Iwasaki

Hitoshi Iwasaki

National University of Singapore (NUS) - Department of Statistics and Applied Probability

Ying Chen

National University of Singapore

Qianqian Du

Southwest University of Finance and Economics

Jun Tu

Singapore Management University - Lee Kong Chian School of Business

Date Written: August 8, 2018

Abstract

We apply a deep neural network supervised learning (DNN) approach to extract text topics from analyst reports based on whether the topics are used to justify the quantitative numbers (justification type), such as the target price, or not (qualitative type). A baseline model without using text information has an adjusted R squared of 2.3% in predicting the cumulative two-day abnormal returns. When we include the topic tones, the adjusted R squared increases to 15.4%. This significant increase of R squared is mainly driven by the qualitative type topics and not much driven by the justification type topics.

Keywords: Textual Analysis; DNN Approach; Topic Tones; Information Content

JEL Classification: C89, G11, G12, G14

Suggested Citation

Iwasaki, Hitoshi and Chen, Ying and Du, Qianqian and Tu, Jun, Topic Tones of Analyst Reports and Stock Returns: A Deep Learning Approach (August 8, 2018). Available at SSRN: https://ssrn.com/abstract=3228485 or http://dx.doi.org/10.2139/ssrn.3228485

Hitoshi Iwasaki (Contact Author)

National University of Singapore (NUS) - Department of Statistics and Applied Probability ( email )

Block S16, Level 7
6 Science Drive 2
117546
Singapore

Ying Chen

National University of Singapore ( email )

Department of Mathematics, Faculty of Science
Block S17, Level 4, 10 Lower Kent Ridge Road
Singapore, Singapore 119076
Singapore

Qianqian Du

Southwest University of Finance and Economics ( email )

Riem of SWUFE
chengdu, Sichuan 611130
China

Jun Tu

Singapore Management University - Lee Kong Chian School of Business ( email )

50 Stamford Road
#04-01
Singapore, 178899
Singapore

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
652
Abstract Views
2,651
rank
50,493
PlumX Metrics