Levels versus Changes : Information Contents of Qualitative Verbal Information

In addition to quantitative financial information, qualitative verbal information has also been continuously changing. In this study, we clarify the information contents of changes in qualitative verbal information. As an analyzable sample, we focus on textual opinion in analyst reports. The analyses reveal that stock prices react considerably to changes in the tone of the report, even after controlling for their levels. Besides, they show asymmetric reactions to the levels and changes of the report tone; while prices overreact to the levels, they underreact to the changes. Our evidence suggests that a change in the textual tone provides incremental information which investors overlook, supporting the informational value of changes in qualitative verbal information