Public companies in the US stock market must annually report their activities and financial performances to the SEC by filing the so-called 10-K form. Recent studies have demonstrated that changes in the textual content of the corporate annual filing (10-K) can convey strong signals of companies’ future returns. In this study, we combine natural language processing techniques and network science to introduce a novel 10-K-based network, named Lazy Network, that leverages year-on-year changes in companies’ 10-Ks detected using a neural network embedding model. (e Lazy Network aims to capture textual changes derived from financial or economic changes on the equity market. Leveraging the Lazy Network, we present a novel investment strategy that attempts to select the least disrupted and stable companies by capturing the peripheries of the Lazy Network. We show that this strategy earns statistically significant risk-adjusted excess returns. Specifically, the proposed portfolios yield up to 95 basis points in monthly five-factor alphas (over 12% annually), outperforming similar strategies in the literature.

Lazy Network: A Word Embedding-Based Temporal Financial Network to Avoid Economic Shocks in Asset Pricing Models / Adosoglou, George; Park, Seonho; Lombardo, Gianfranco; Cagnoni, Stefano; Pardalos, Panos M.. - In: COMPLEXITY. - ISSN 1099-0526. - 2022:(2022), pp. 1-12. [10.1155/2022/9430919]

Lazy Network: A Word Embedding-Based Temporal Financial Network to Avoid Economic Shocks in Asset Pricing Models

Lombardo, Gianfranco
Conceptualization
;
Cagnoni, Stefano
Supervision
;
2022

Abstract

Public companies in the US stock market must annually report their activities and financial performances to the SEC by filing the so-called 10-K form. Recent studies have demonstrated that changes in the textual content of the corporate annual filing (10-K) can convey strong signals of companies’ future returns. In this study, we combine natural language processing techniques and network science to introduce a novel 10-K-based network, named Lazy Network, that leverages year-on-year changes in companies’ 10-Ks detected using a neural network embedding model. (e Lazy Network aims to capture textual changes derived from financial or economic changes on the equity market. Leveraging the Lazy Network, we present a novel investment strategy that attempts to select the least disrupted and stable companies by capturing the peripheries of the Lazy Network. We show that this strategy earns statistically significant risk-adjusted excess returns. Specifically, the proposed portfolios yield up to 95 basis points in monthly five-factor alphas (over 12% annually), outperforming similar strategies in the literature.
Lazy Network: A Word Embedding-Based Temporal Financial Network to Avoid Economic Shocks in Asset Pricing Models / Adosoglou, George; Park, Seonho; Lombardo, Gianfranco; Cagnoni, Stefano; Pardalos, Panos M.. - In: COMPLEXITY. - ISSN 1099-0526. - 2022:(2022), pp. 1-12. [10.1155/2022/9430919]
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11381/2922088
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