SSRN

We extract information from 10-K risk disclosures: topic models measure what is discussed, and context models measure how it is discussed. We find that both contain significant predictive information about future aggregate risk exposures, even controlling for (structured) firm characteristics, and that this information is both economically valuable and statistically distinct. We present evidence that management’s discussion helps to predict some future corporate actions, which in turn can alter the firm’s exposure to aggregate risk.

• asset pricing
• equity
• macroeconomics
• R&R
• text data