Speculative and Informative: Lessons from Market Reactions to Speculation Cues

J. Anthony Cookson; S. Katie Moon; Joonki Noh

doi:10.1093/rcfs/cfaf021

Speculative and Informative: Lessons from Market Reactions to Speculation Cues

J. Anthony Cookson¹; S. Katie Moon¹; Joonki Noh²

¹ Leeds School of Business, University of Colorado Boulder · ² Weatherhead School of Management Case Western Reserve University Cleveland

The Review of Corporate Finance Studies 2025

Abstract Speculative language in corporate disclosures can convey valuable information about firms’ fundamentals. We evaluate this idea by developing a measure for speculative statements based on sentences marked with the “weasel tag” on Wikipedia. In the 16-week test period after filing, greater use of speculative statements in 10-Ks predicts higher and nonreverting abnormal returns, more insider and informed buying, and higher news sentiment. These findings imply that managers’ usage of speculative language in 10-Ks reflects voluntary disclosure of their private information about the positive prospects of events when market implications of the events are uncertain and thus have room for (re)interpretation. (JEL D82, G14, G12)

DOI: 10.1093/rcfs/cfaf021
Language: en
Export: BibTeX
Sources: openalex crossref