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Measuring investment opportunities using financial statement text

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Item Summary Basu, Sudipta Ma, Xinjie Tran, Hoa 2018-11-27T19:17:07Z 2018-11-27T19:17:07Z 2018-09-01
dc.description.abstract We analyze 10-K texts from EDGAR during 1995-2009 to score firms’ investment opportunity sets on multiple dimensions. We identify 646 unique key words that predict future investments and group them into 62 factors. Industry-specific factors include Bio-Pharmaceutical, Banking, Information Technology, Oil & Gas and Semi-conductor, while more general factors include Impairment, Debt Intensity, Executive Employment, Preferred Stock Buyback and Capital Seeking. Our multi-dimensional measures of firms’ investment opportunities outperform Tobin’s Q and/or industry-fixed effects, in predicting out-of-sample future (2010-15) investments and related corporate policies, and even inform incrementally over lagged dependent variables.
dc.subject Investment opportunities
dc.subject IOS
dc.subject textual analysis
dc.subject Tobin’s Q
dc.subject corporate policies
dc.subject lasso
dc.title Measuring investment opportunities using financial statement text
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