Research Archive

More Than Words: Quantifying Language to Measure Firms' Fundamentals

Paul Tetlock, Maytal Saar-Tsechansky, Sofus Macskassy

Publication type: Journal article

Research Archive Topic: Capital Markets and Investments


We examine whether a simple quantitative measure of language can be used to predict individual firms' accounting earnings and stock returns. Our three main findings are: (1) the fraction of negative words in firm-specific news stories forecasts low firm earnings; (2) firms' stock prices briefly underreact to the information embedded in negative words; and (3) the earnings and return predictability from negative words is largest for the stories that focus on fundamentals. Together these findings suggest that linguistic media content captures otherwise hard-to-quantify aspects of firms' fundamentals, which investors quickly incorporate into stock prices.

The definitive version of this article is available at Wiley Interscience.
View research
Download PDF


Tetlock, Paul, Maytal Saar-Tsechansky, and Sofus Macskassy. "More Than Words: Quantifying Language to Measure Firms' Fundamentals." Journal of Finance 63 (June 2008): 1437-1467.

Each author name for a Columbia Business School faculty member is linked to a faculty research page, which lists additional publications by that faculty member.

Each topic is linked to an index of publications on that topic.