risk factor count z
What it checks
When a company lists materially more discrete risks in its 10-K vs prior year, the stock tends to underperform over the next 3-6 months.
Mechanism
Distinct risk-factor count in 10-K Item 1A — disclosure-density measure — is a forward indicator of realized volatility and short-side returns when it rises sharply over baseline.
Signal rule
sec_10k_sections.item_1a_text distinct risk-factor header count Y/Y delta own-z >= 1.0 -> SHORT 90/180d
Data dependencies
daily_pricesAdjusted-close OHLCV for every US-listed ticker; primary price feed.
sec_10k_sectionsWorker data table — see services/worker schema.
Expected edge
- Paper alpha
- ~2-3% over 3-6mo on top-quartile
- Paper window
- T+1 to T+180d
Campbell et al 2014: top-quartile risk-factor count increase ~2-3% underperformance over 3-6mo.
Related families
risk factor 10k item1a deltaFilingsY/Y change in Item 1A (Risk Factors) text predicts negative drift; distinct from filing_text_delta.
filing text deltaText-NLPYear-over-year change in uncertainty/risk language in 10-K Item 1 ('Business' section). Spike in 'may', 'could', 'uncertain', 'challenging', 'risk' tokens per 10K words → management is privately more cautious → forward earnings miss / underperformance. Stable or decreasing language → quietly confident outlook → outperform.
legal proceedings item3 deltaFilingsY/Y delta in Item 3 (Legal Proceedings) text predicts negative drift on litigation expansion.
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