Speed read

Shares of companies that are faster to file their annual and quarterly reports command a significant premium compared with slower-filing companies

New research from NN Investment Partners reveals a strong link between report timeliness, reporting sentiment and future stock returns

By using natural language processing and sentiment analysis techniques, investors can better locate untapped opportunities for alpha generation

In full

Shares of companies that are quicker to file their annual and quarterly reports command a significant premium compared with firms that are slower to report.

New research from NN Investment Partners (NN IP) into the causes of this phenomenon has uncovered a strong link between future stock returns, reporting timeliness and document characteristics. The research underscores the valuable role that natural language processing can play in investment analysis and provides a new lens for evaluating company reports.

In collaboration with Bas Peeters, Visiting Fellow at the Vrije Universiteit Amsterdam, NN IP's European Equity team investigated how reporting sentiment might be linked to future stock returns. By using natural language processing (NLP) techniques, they calculated the tone of report text and the changes between sequential quarterly and annual reports from the same company.

The research reveals that reporting lag (a slower filing time, typically amounting to just a few days) is linked to more negative phrasing throughout the report and to a lower level of similarity to the previous report. This in turn has predictive power for future stock returns, as slower-filing companies measurably underperform faster-filing firms.

The researchers also uncovered several potential reasons for this connection. "Making changes to a report takes time," said Karim Bannouh, senior portfolio manager in NN IP's European Equity team, "especially if a company is trying to manipulate how it is perceived or highlight certain elements."

Another possible reason is that faster-filing companies are ones that can process information more quickly and efficiently, which has positive implications for business operations. "The timeliness of submission could be a proxy for the company's efficiency," added Bannouh. "There's less congestion in firms that can process information more rapidly."

The researchers also found that this phenomenon applies across different sectors and regions, and that it cannot be explained away by large-cap firms filing faster than small caps. "We've frequently encountered the assumption that our findings could be attributable to a size bias," said Derek Geng, data scientist at NN IP.

"This is because larger companies usually have more human capital and therefore process information more quickly. But even if we analyze large-cap and small-cap universes separately, we find that firms that file faster enjoy significantly higher stock returns than slower-filing companies."

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Speed read

Shares of companies that are faster to file their annual and quarterly reports command a significant premium compared with slower-filing companies

New research from NN Investment Partners reveals a strong link between report timeliness, reporting sentiment and future stock returns

By using natural language processing and sentiment analysis techniques, investors can better locate untapped opportunities for alpha generation

In full

Shares of companies that are quicker to file their annual and quarterly reports command a significant premium compared with firms that are slower to report.

New research from NN Investment Partners (NN IP) into the causes of this phenomenon has uncovered a strong link between future stock returns, reporting timeliness and document characteristics. The research underscores the valuable role that natural language processing can play in investment analysis and provides a new lens for evaluating company reports.

In collaboration with Bas Peeters, Visiting Fellow at the Vrije Universiteit Amsterdam, NN IP's European Equity team investigated how reporting sentiment might be linked to future stock returns. By using natural language processing (NLP) techniques, they calculated the tone of report text and the changes between sequential quarterly and annual reports from the same company.

The research reveals that reporting lag (a slower filing time, typically amounting to just a few days) is linked to more negative phrasing throughout the report and to a lower level of similarity to the previous report. This in turn has predictive power for future stock returns, as slower-filing companies measurably underperform faster-filing firms.

The researchers also uncovered several potential reasons for this connection. "Making changes to a report takes time," said Karim Bannouh, senior portfolio manager in NN IP's European Equity team, "especially if a company is trying to manipulate how it is perceived or highlight certain elements."

Another possible reason is that faster-filing companies are ones that can process information more quickly and efficiently, which has positive implications for business operations. "The timeliness of submission could be a proxy for the company's efficiency," added Bannouh. "There's less congestion in firms that can process information more rapidly."

The researchers also found that this phenomenon applies across different sectors and regions, and that it cannot be explained away by large-cap firms filing faster than small caps. "We've frequently encountered the assumption that our findings could be attributable to a size bias," said Derek Geng, data scientist at NN IP.

"This is because larger companies usually have more human capital and therefore process information more quickly. But even if we analyze large-cap and small-cap universes separately, we find that firms that file faster enjoy significantly higher stock returns than slower-filing companies."