From Text to Beta: Macroeconomic Disclosures and Firm-Level Systematic Risk
Abstract
Using news text from The Wall Street Journal and macroeconomic disclosures in 10-K filings, we address the challenge of characterizing both time-varying aggregate risks and firm-level risk exposures. We develop a disclosure-based measure of systematic risk that (1) reveals salient macro risks in each period, (2) provides a text-based estimate of earnings exposure to these risks, and (3) explains the cross-section of stock returns. We also show that macro disclosures are pervasive across the annual report, grow over time, vary with the business cycle, and exhibit within-firm variation, consistent with the time-varying nature of systematic risk exposure. Overall, disclosures yield transparent and economically interpretable estimates of firm-level systematic risk. Data Availability: Data are obtained from SEC filings, Bureau of Economic Analysis, The Wall Street Journal, Compustat, CRSP, I/B/E/S.
- DOI
- 10.2308/tar-2024-0833
- Pages
- 1-39
- Language
- en
- Sources
- crossref