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dc.contributor.authorBaginski, Stephen
dc.contributor.authorDemers, Elizabeth
dc.contributor.authorWang, Chong
dc.contributor.authorYu, Julia
dc.date.accessioned2016-02-12T21:30:08Z
dc.date.available2016-02-12T21:30:08Z
dc.date.issued2015-11-30
dc.identifier.urihttp://hdl.handle.net/10945/47795
dc.description.abstractResearch documents that linguistic tone is incrementally informative about stock returns. What remains a puzzle is the mechanism by which investors can assess its credibility. We examine whether contemporaneous information in management earnings forecasts serves as a timely alternative to ex post verification. We document that ex post verifiable quantitative news in unbundled forecasts, and characteristics of the linguistic tone itself, affect investors’ pricing of tone. Consistent with higher quality signals enhancing the credibility of contemporaneous lower quality signals, we find that quantitative news verifies the associated linguistic tone; when the two signals have the same sign, the price effect of tone is stronger. Furthermore, the pricing attenuation of tone is increasing in the imprecision of the quantitative forecast, suggesting that lower forecast quality compromises the quantitative signal’s credibility enhancement. Managerial incentives to inflate tone lead to the verification effect being greater for optimistic language, while management’s use of hyperbole results in attenuation of the tone’s pricing.en_US
dc.format.extent45 p.en_US
dc.rightsThis publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.en_US
dc.titleContemporaneous verification of language: evidence from management earnings forecastsen_US
dc.typeArticleen_US
dc.contributor.corporateNaval Postgraduate School (U.S.)en_US
dc.contributor.departmentBusiness & Public Policy (GSBPP)en_US
dc.subject.authorManagement forecastsen_US
dc.subject.authorLinguistic toneen_US
dc.subject.authorCheap talken_US
dc.subject.authorManagement incentivesen_US


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