Transcript Obfuscation Bloomfield
In plain terms
When managers' call language gets harder to read (rising Fog index) Q/Q, they're hiding bad news. Predicts 12-month underperformance.
How it works
Bloomfield (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).
Data dependencies
- Daily prices
Adjusted-close OHLCV for every US-listed ticker; primary price feed.
- Earnings call transcripts
Full earnings-call transcripts (prepared + Q&A), tokenised.
Expected edge
- Reported return
- ~4% annual underperformance on Q/Q fog-rise decile (Bochkay et al 2020)
- Tested over
- 2002-2019
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).
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