Quoc H. Nguyen
University Hall, Department of Finance (MC 168)
601 S. Morgan St.
Chicago, IL 60607
Institutional Affiliation: University of Illinois Chicago
NBER Working Papers and Publications
|September 2018||Lazy Prices|
with Lauren Cohen, Christopher Malloy: w25084
Using the complete history of regular quarterly and annual filings by U.S. corporations from 1995-2014, we show that when firms make an active change in their reporting practices, this conveys an important signal about future firm operations. Changes to the language and construction of financial reports also have strong implications for firms’ future returns: a portfolio that shorts “changers” and buys “non-changers” earns up to 188 basis points in monthly alphas (over 22% per year) in the future. Changes in language referring to the executive (CEO and CFO) team, regarding litigation, or in the risk factor section of the documents are especially informative for future returns. We show that changes to the 10-Ks predict future earnings, profitability, future news announcements, and even futu...