Risks Factors that Matter: Textual Analysis of Risk Disclosures for the Cross-Section of Returns

Working Papers

I introduce risk factors that not only explain the cross-section of returns, but also unambiguously represent economic risk for the firms, are interpretable, and come directly from the companies. I exploit machine learning and natural language processing techniques to identify from the 10-K annual reports the types of risks that firms face, and to quantify how much each firm is exposed to each type of risk.Read More