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Please use this identifier to cite or link to this item: http://arks.princeton.edu/ark:/88435/dsp01r207ts06m
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dc.contributor.advisorKleven, Henrik-
dc.contributor.authorUlene, Ben-
dc.date.accessioned2018-08-03T15:19:48Z-
dc.date.available2018-08-03T15:19:48Z-
dc.date.created2018-04-10-
dc.date.issued2018-08-03-
dc.identifier.urihttp://arks.princeton.edu/ark:/88435/dsp01r207ts06m-
dc.description.abstractThe media and financial community often rely on “earnings surprise” – the difference between company performance and the average of financial analysts’ forecasts – to summarize the manner in which earnings reports provide the market with new, unexpected information. Prior studies have found such a metric to exhibit a host of flaws, however, suggesting there may be a place for an alternative way to think about how quarterly earnings and investor expectations interact. In this study, I seek to shift the focus from numerical earnings figures to linguistic analyses of textual statements from both investors and management. I define an alternative metric called the “Reality Check” as the difference between the management sentiment as expressed on earnings conference calls and investor sentiment as expressed on Twitter – each of which has been found in prior studies to correlate with stock market moves. Using a sample of over 4,500 earnings reports from 490 companies, I test whether this metric can predict market reactions to earnings, finding it to have statistically significant predictive power for both short-term stock returns and stock price movements in the 15-day window before and after earnings. Despite this finding, the metric exhibits worse predictive power than traditional consensus-based earnings surprise when modeled independently and only adds a slight amount of predictive power when modeled together. This suggests that significant improvements would be required before such a metric could merit a place next to consensus-based forecasts when evaluating earnings reports.en_US
dc.format.mimetypeapplication/pdf-
dc.language.isoenen_US
dc.titleReality Check: A Linguistic Analysis-Based Redefinition of Quarterly Earnings Surpriseen_US
dc.typePrinceton University Senior Theses-
pu.date.classyear2018en_US
pu.departmentEconomicsen_US
pu.pdf.coverpageSeniorThesisCoverPage-
pu.contributor.authorid960956826-
pu.certificateApplications of Computing Programen_US
pu.certificateFinance Programen_US
Appears in Collections:Economics, 1927-2020

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