transcript uncertainty score
What it checks
When management uses lots of hedging words ('may', 'could', 'approximately') on the earnings call, the stock tends to underperform over the next 1-3 months.
Mechanism
LM uncertainty-lexicon firing rate (modal verbs, approximations, hedges) on the full transcript predicts forward volatility + negative-tail returns. Bochkay-Brown-Leone-Tucker 2024 update reports a 30-90d negative drift on uncertainty-z high tail.
Signal rule
earnings_call_transcripts: LM unc_rate own-z >= 1.0 -> SHORT 30/60/90d
Data dependencies
daily_pricesAdjusted-close OHLCV for every US-listed ticker; primary price feed.
earnings_call_transcriptsFull earnings-call transcripts (prepared + Q&A), tokenised.
Expected edge
- Paper alpha
- ~2-4% over 60-90d on top-decile uncertainty
- Paper window
- T+1 to T+90d
Loughran-McDonald 2014 + Bochkay et al 2024: uncertainty z >= +1 -> ~2-4% drift over 60-90d.
Related families
transcript exec uncertaintyText-NLPLoughran-McDonald 2011 + Demers et al. 2021 (Frontiers in AI): the uncertainty/weak-modal word rate within EXECUTIVE turns (not the full transcript) is a sharper bearish signal than overall transcript sentiment. CEO/CFO speech is filtered by speaker regex (chief executive, chief financial, ceo, cfo, president, chairman). SHORT when exec_unc_z ≥ +1.0; long leg disabled because some execs are naturally terse.
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).
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.
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