Verification on stock return predictability of text in analyst reports

As sharing of analyst reports became widely available, reports generated by analysts have become a useful tool to reduce di fference in financial information between market participants. The quantitative information of analyst reports has been used in many ways to predict stock returns. However, there are relatively few domestic studies on the prediction power of text information in analyst reports to predict stock returns. We test stock return predictability of text in analyst reports by creating variables representing the TONE from the text. To overcome the limitation of the linear-model-assumption-based approach, we use the random-forest-based F-test.