Abstract
A large body of research studies shows that the quantitative outputs of analyst reports (e.g., earnings forecasts and recommendations) have informational value. In this study, by analyzing the textual tone of headlines in analyst reports, I reveal that textual opinion in the reports – a representative qualitative output – contains incremental information that has a significant impact on stock prices. The analysis reveals that stock prices react considerably to the report tone. In addition, economically and statistically significant price drifts, indicating price underreaction, are observed in cases of negative report tone. However, these price behaviors are relatively weak when the report tone is used to support quantitative measures. In sum, textual opinion in reports by itself provides value-relevant information, especially when textual opinion is used to provide independent information.
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