lazy prices short
What it checks
The short side of 'lazy prices': firms that rewrote their 10-K heavily YoY underperform by 188 bps/month. Most of the lazy-prices alpha lives on this short leg.
Mechanism
Firms rewriting 10-K sections year-on-year signal regime change. Cohen et al. find shorting 'changers' yields up to 188bps/month — the asymmetry is strong: most alpha lives in the SHORT leg. Adds section-resolved diff (Item 1A risk-factors, Item 7 MD&A) over whole-document cosine.
Signal rule
section-resolved cosine_sim drop ≥ 0.15 on Item 1A or Item 7 → short 60d
Data dependencies
sec_filing_similarity (extended)Document-cosine similarity between successive 10-K / 10-Q filings.
sec_filings_sections10-K / 10-Q / 8-K cleaned text + section maps.
Expected edge
- Paper alpha
- ~188 bps/month short-leg underperformance (Cohen-Malloy-Nguyen 2020)
- Paper window
- 1995-2014
22% ann. long-short in Cohen et al.; doubles current long-only edge
Illustrative pattern only
NOT a backtestIllustrative pattern only — see /app for live backtests and the actual current equity curve.
Example tickers where this is likely to fire
Illustrative only — the signal fires based on the live data, not a fixed list.
Related families
lazy pricesEventStocks whose 10-K (or 10-Q) text barely changes year-over-year OUTPERFORM those with big language shifts. The intuition: boring filings ≈ stable business ≈ slow-and-steady cash flow. Big text changes signal management hiding bad news with new boilerplate. Effect size: ~0.4 Sharpe alone, still replicating in 2020-2024. Long when the most recent 10-K's cosine similarity to prior year is in the top quartile (≥ 0.85); hold ~12 months until the next filing.
transcript obfuscation bloomfieldText-NLPBloomfield (2002) Incomplete Revelation Hypothesis: managers obfuscate bad news through reduced readability. Bochkay-Chychyla-Nanda (2020 JAR) formalized the test on conference calls: the Gunning Fog Index Q/Q delta predicts 12-month negative drift on the readability-decay decile (~4% underperformance annualised). Own-history z of the call's Fog index: short when fog_z ≥ +1 (sudden complexity spike → obfuscation), long when fog_z ≤ −1 (sudden simplification, often pre-positive guidance).
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