UQO EDGAR Research DB: extension S&P 500 -> Russell 3000 (pipeline scalable, exécution distribuée MacLustr)
Co-Authored-By: Claude Fable 5.1 <noreply@anthropic.com>
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.claude/settings.local.json
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| 1 | +{ | |
| 2 | + "disabledMcpjsonServers": [ | |
| 3 | + "cluster" | |
| 4 | + ] | |
| 5 | +} | |
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.env.example
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| 1 | +# EDGAR Research Database — Environment Configuration | |
| 2 | + | |
| 3 | +# SEC EDGAR requires a user-agent string with contact email | |
| 4 | +SEC_USER_AGENT="UQO-Research simon-pierre.boucher@uqo.ca" | |
| 5 | + | |
| 6 | +# Project paths (defaults work for standard layout) | |
| 7 | +# DATA_DIR=./data | |
| 8 | +# DUCKDB_PATH=./data/duckdb/edgar_research.duckdb | |
| 9 | + | |
| 10 | +# Embedding API (optional — defaults to local sentence-transformers) | |
| 11 | +# OPENAI_API_KEY=sk-... | |
| 12 | +# OPENROUTER_API_KEY=sk-or-... | |
| 13 | +# EMBEDDING_MODEL=all-MiniLM-L6-v2 | |
| 14 | +# EMBEDDING_BATCH_SIZE=256 | |
| 15 | + | |
| 16 | +# Logging | |
| 17 | +# LOG_LEVEL=INFO | |
| 18 | +# LOG_FORMAT=json | |
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.gitignore
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| 1 | +# data and secrets never enter git | |
| 2 | +data/ | |
| 3 | +.venv/ | |
| 4 | +__pycache__/ | |
| 5 | +*.pyc | |
| 6 | +.env | |
| 7 | +project-db/.env | |
| 8 | +project-db/data/ | |
| 9 | +project-db/logs/ | |
| 10 | +*.duckdb | |
| 11 | +*.zip | |
| 12 | +.DS_Store | |
| 13 | +edgar_research_db.egg-info/ | |
| 14 | +analysis/data/ | |
| 15 | +outputs/ | |
| 16 | +UQ_WP_template/*.aux | |
| 17 | +UQ_WP_template/*.log | |
| 18 | +UQ_WP_template/*.fls | |
| 19 | +UQ_WP_template/*.fdb_latexmk | |
| 20 | +UQ_WP_template/*.out | |
| 21 | +UQ_WP_template/*.synctex* | |
| 22 | +project-db/docs/*.aux | |
| 23 | +project-db/docs/*.log | |
| 24 | +project-db/docs/*.fls | |
| 25 | +project-db/docs/*.fdb_latexmk | |
| 26 | +project-db/docs/*.out | |
| 27 | +project-db/docs/*.toc | |
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| 1 | +{ | |
| 2 | + "disabledMcpjsonServers": [ | |
| 3 | + "cluster" | |
| 4 | + ] | |
| 5 | +} | |
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| 1 | +$pdf_mode = 1; | |
| 2 | +$pdflatex = 'pdflatex -interaction=nonstopmode -halt-on-error -synctex=1 %O %S'; | |
| 3 | +$bibtex_use = 2; | |
| 4 | +$clean_ext = 'synctex.gz run.xml bbl bcf fdb_latexmk fls log aux out toc lof lot blg'; | |
| 5 | +@default_files = ('main.tex'); | |
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| 1 | +.PHONY: all clean distclean | |
| 2 | + | |
| 3 | +all: | |
| 4 | + latexmk | |
| 5 | + | |
| 6 | +clean: | |
| 7 | + latexmk -c | |
| 8 | + | |
| 9 | +distclean: | |
| 10 | + latexmk -C | |
| 11 | + rm -f *.synctex.gz *.run.xml *.bbl *.bcf | |
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UQ_WP_template/appendix/appendix.tex
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| 1 | +% ============================================================================ | |
| 2 | +% Appendix | |
| 3 | +% ============================================================================ | |
| 4 | +\newpage | |
| 5 | +\begin{appendices} | |
| 6 | + | |
| 7 | +\renewcommand{\thetable}{A\arabic{table}} | |
| 8 | +\renewcommand{\thefigure}{A\arabic{figure}} | |
| 9 | +\setcounter{table}{0} | |
| 10 | +\setcounter{figure}{0} | |
| 11 | + | |
| 12 | +\section{Variable Definitions} | |
| 13 | +\label{app:variables} | |
| 14 | + | |
| 15 | +\begin{table}[htbp] | |
| 16 | + \centering | |
| 17 | + \caption{Variable Definitions} | |
| 18 | + \label{tab:app_variables} | |
| 19 | + \small | |
| 20 | + \begin{tabular}{@{}p{4.2cm}p{10.5cm}@{}} | |
| 21 | + \toprule | |
| 22 | + Variable & Definition \\ | |
| 23 | + \midrule | |
| 24 | + AI\,Adopt (\texttt{ai\_adoption\_wmean}) & Section-weighted mean cosine similarity of a firm's 10-K text chunks to the AI-internal-adoption anchor in fiscal year $Y$. \\[4pt] | |
| 25 | + AI\,Infra (\texttt{ai\_infrastructure\_wmean}) & Section-weighted mean similarity to the AI-compute-infrastructure anchor. \\[4pt] | |
| 26 | + AI\,Risk (\texttt{ai\_disruption\_risk\_wmean}) & Section-weighted mean similarity to the AI-product-disruption-risk anchor. \\[4pt] | |
| 27 | + AI\,Compos & $\tfrac12[z(\text{AI\,Adopt})+z(\text{AI\,Infra})]$, with $z$ the within-year cross-sectional standardization. \\[4pt] | |
| 28 | + Forward return & Buy-and-hold simple return from July of $Y{+}1$ to June of $Y{+}2$ (adjusted close, dividends reinvested). \\[4pt] | |
| 29 | + Market-adjusted return & Forward return minus the contemporaneous SPY return. \\[4pt] | |
| 30 | + Size & Natural logarithm of the market-cap proxy (latest shares outstanding $\times$ price) at formation. \\[4pt] | |
| 31 | + Momentum & Own return over the 12 months ending at formation, skipping the last month. \\[4pt] | |
| 32 | + Volatility & Annualized standard deviation of monthly returns over the trailing 12 months. \\[4pt] | |
| 33 | + Post & Indicator equal to one for formation (fiscal) years $\ge 2022$. \\[4pt] | |
| 34 | + CAR & Cumulative market-model abnormal return; market model estimated Jan--Oct 2022, event window Nov 2022--Jun 2024. \\ | |
| 35 | + \bottomrule | |
| 36 | + \end{tabular} | |
| 37 | +\end{table} | |
| 38 | + | |
| 39 | +\section{Data Sources and Reproducibility} | |
| 40 | +\label{app:repro} | |
| 41 | + | |
| 42 | +Semantic factors are from the EDGAR Research Database (UQO), which embeds 10-K text with the | |
| 43 | +\texttt{all-MiniLM-L6-v2} sentence transformer and scores each chunk by cosine similarity to curated | |
| 44 | +anchor passages. Equity prices (monthly and daily) are from Yahoo Finance; the Fama--French five | |
| 45 | +factors, the momentum factor, and the risk-free rate are from the Kenneth R.\ French data library. All | |
| 46 | +return tests use look-ahead-free July-formation forward returns, with signals taken from the 10-K of | |
| 47 | +the preceding fiscal year. The analysis pipeline downloads prices, builds the merged firm-year panel, | |
| 48 | +runs the portfolio sorts, factor regressions, panel and Fama--MacBeth estimators, the | |
| 49 | +difference-in-differences specifications, and the market-model event study, and emits all figures and | |
| 50 | +tables programmatically; numerical results are serialized to machine-readable result files so that | |
| 51 | +every number reported in the paper is reproducible from source. | |
| 52 | + | |
| 53 | +\end{appendices} | |
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UQ_WP_template/figures/main_figure.tex
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| 1 | +% ============================================================================ | |
| 2 | +% Figure: Main Result | |
| 3 | +% ============================================================================ | |
| 4 | +\begin{figure}[htbp] | |
| 5 | + \centering | |
| 6 | + % --- Replace placeholder with actual figure file --- | |
| 7 | + % \includegraphics[width=0.85\textwidth]{figures/main_result.pdf} | |
| 8 | + % | |
| 9 | + % Placeholder box (remove when replacing with actual figure) | |
| 10 | + \fbox{\parbox{0.85\textwidth}{\centering\vspace{4cm} | |
| 11 | + \textit{[Insert figure here: figures/main\_result.pdf]} | |
| 12 | + \vspace{4cm}}} | |
| 13 | + % | |
| 14 | + \caption{Main Result --- Effect of $X$ on $Y$ Over Time} | |
| 15 | + \label{fig:main_result} | |
| 16 | + \begin{minipage}{0.85\textwidth} | |
| 17 | + \vspace{0.3cm} | |
| 18 | + \footnotesize\textit{Notes:} This figure plots \ldots{} over the sample period January~1990 to December~2023. The solid line represents \ldots{} The shaded area indicates the 95\% confidence interval. The dashed vertical line marks \ldots{} | |
| 19 | + \end{minipage} | |
| 20 | +\end{figure} | |
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UQ_WP_template/main.bbl
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| 1 | +\ifx\undefined\bysame | |
| 2 | +\newcommand{\bysame}{\leavevmode\hbox to\leftmargin{\hrulefill\,\,}} | |
| 3 | +\fi | |
| 4 | +\begin{thebibliography}{xx} | |
| 5 | + | |
| 6 | +\harvarditem[Acemoglu and Restrepo]{Acemoglu and | |
| 7 | + Restrepo}{2020}{acemoglu2020wrong} | |
| 8 | +{\bf Acemoglu, Daron and Pascual Restrepo}, ``Robots and Jobs: Evidence from | |
| 9 | + {US} Labor Markets,'' {\it Journal of Political Economy}, 2020, {\it 128} | |
| 10 | + (6), 2188--2244. | |
| 11 | + | |
| 12 | +\harvarditem[Babina et al.]{Babina, Fedyk, He and | |
| 13 | + Hodson}{2024}{babina2024aiinvestment} | |
| 14 | +{\bf Babina, Tania, Anastassia Fedyk, Alex He, and James Hodson}, ``Artificial | |
| 15 | + Intelligence, Firm Growth, and Product Innovation,'' {\it Journal of | |
| 16 | + Financial Economics}, 2024, {\it 151}, 103745. | |
| 17 | + | |
| 18 | +\harvarditem[Baker and Wurgler]{Baker and Wurgler}{2006}{bakerwurgler2006} | |
| 19 | +{\bf Baker, Malcolm and Jeffrey Wurgler}, ``Investor Sentiment and the | |
| 20 | + Cross-Section of Stock Returns,'' {\it Journal of Finance}, 2006, {\it 61} | |
| 21 | + (4), 1645--1680. | |
| 22 | + | |
| 23 | +\harvarditem[Barber and Odean]{Barber and Odean}{2008}{barberodean2008} | |
| 24 | +{\bf Barber, Brad~M. and Terrance Odean}, ``All That Glitters: The Effect of | |
| 25 | + Attention and News on the Buying Behavior of Individual and Institutional | |
| 26 | + Investors,'' {\it Review of Financial Studies}, 2008, {\it 21} (2), 785--818. | |
| 27 | + | |
| 28 | +\harvarditem[Bolton and Kacperczyk]{Bolton and | |
| 29 | + Kacperczyk}{2021}{bolton2021risk} | |
| 30 | +{\bf Bolton, Patrick and Marcin Kacperczyk}, ``Do Investors Care about Carbon | |
| 31 | + Risk?,'' {\it Journal of Financial Economics}, 2021, {\it 142} (2), 517--549. | |
| 32 | + | |
| 33 | +\harvarditem[Bybee et al.]{Bybee, Kelly, Manela and | |
| 34 | + Xiu}{2024}{bybee2024narrative} | |
| 35 | +{\bf Bybee, Leland, Bryan Kelly, Asaf Manela, and Dacheng Xiu}, ``Business News | |
| 36 | + and Business Cycles,'' {\it Journal of Finance}, 2024, {\it 79} (5), | |
| 37 | + 3105--3147. | |
| 38 | + | |
| 39 | +\harvarditem[Cameron et al.]{Cameron, Gelbach and Miller}{2011}{cameron2011} | |
| 40 | +{\bf Cameron, A.~Colin, Jonah~B. Gelbach, and Douglas~L. Miller}, ``Robust | |
| 41 | + Inference with Multiway Clustering,'' {\it Journal of Business \& Economic | |
| 42 | + Statistics}, 2011, {\it 29} (2), 238--249. | |
| 43 | + | |
| 44 | +\harvarditem[Cohen et al.]{Cohen, Malloy and Nguyen}{2020}{cohen2020lazy} | |
| 45 | +{\bf Cohen, Lauren, Christopher Malloy, and Quoc Nguyen}, ``Lazy Prices,'' {\it | |
| 46 | + Journal of Finance}, 2020, {\it 75} (3), 1371--1415. | |
| 47 | + | |
| 48 | +\harvarditem[Cong et al.]{Cong, Liang and Zhang}{2022}{cong2022textfactor} | |
| 49 | +{\bf Cong, Lin~William, Tengyuan Liang, and Xiao Zhang}, ``Textual Factors: A | |
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| 51 | + Information,'' Technical Report, Working Paper 2022. | |
| 52 | + | |
| 53 | +\harvarditem[Da et al.]{Da, Engelberg and Gao}{2011}{da2011} | |
| 54 | +{\bf Da, Zhi, Joseph Engelberg, and Pengjie Gao}, ``In Search of Attention,'' | |
| 55 | + {\it Journal of Finance}, 2011, {\it 66} (5), 1461--1499. | |
| 56 | + | |
| 57 | +\harvarditem[DellaVigna and Pollet]{DellaVigna and | |
| 58 | + Pollet}{2009}{dellavigna2009} | |
| 59 | +{\bf DellaVigna, Stefano and Joshua~M. Pollet}, ``Investor Inattention and | |
| 60 | + {Friday} Earnings Announcements,'' {\it Journal of Finance}, 2009, {\it 64} | |
| 61 | + (2), 709--749. | |
| 62 | + | |
| 63 | +\harvarditem[Eisfeldt et al.]{Eisfeldt, Schubert and | |
| 64 | + Zhang}{2023}{eisfeldt2023generative} | |
| 65 | +{\bf Eisfeldt, Andrea~L., Gregor Schubert, and Miao~Ben Zhang}, ``Generative | |
| 66 | + {AI} and Firm Values,'' NBER Working Paper 31222, National Bureau of Economic | |
| 67 | + Research 2023. | |
| 68 | + | |
| 69 | +\harvarditem[Fama and MacBeth]{Fama and MacBeth}{1973}{famamacbeth1973} | |
| 70 | +{\bf Fama, Eugene~F. and James~D. MacBeth}, ``Risk, Return, and Equilibrium: | |
| 71 | + Empirical Tests,'' {\it Journal of Political Economy}, 1973, {\it 81} (3), | |
| 72 | + 607--636. | |
| 73 | + | |
| 74 | +\harvarditem[Fama and French]{Fama and French}{2015}{famafrench2015} | |
| 75 | +{\bf \bysame{} and Kenneth~R. French}, ``A Five-Factor Asset Pricing Model,'' | |
| 76 | + {\it Journal of Financial Economics}, 2015, {\it 116} (1), 1--22. | |
| 77 | + | |
| 78 | +\harvarditem[Gentzkow et al.]{Gentzkow, Kelly and Taddy}{2019}{gentzkow2019} | |
| 79 | +{\bf Gentzkow, Matthew, Bryan Kelly, and Matt Taddy}, ``Text as Data,'' {\it | |
| 80 | + Journal of Economic Literature}, 2019, {\it 57} (3), 535--574. | |
| 81 | + | |
| 82 | +\harvarditem[Hirshleifer et al.]{Hirshleifer, Hsu and | |
| 83 | + Li}{2013}{hirshleifer2013innovative} | |
| 84 | +{\bf Hirshleifer, David, Po-Hsuan Hsu, and Dongmei Li}, ``Innovative Efficiency | |
| 85 | + and Stock Returns,'' {\it Journal of Financial Economics}, 2013, {\it 107} | |
| 86 | + (3), 632--654. | |
| 87 | + | |
| 88 | +\harvarditem[Hirshleifer et al.]{Hirshleifer, Lim and | |
| 89 | + Teoh}{2009}{hirshleifer2009driven} | |
| 90 | +{\bf \bysame{}, Sonya~S. Lim, and Siew~Hong Teoh}, ``Driven to Distraction: | |
| 91 | + Extraneous Events and Underreaction to Earnings News,'' {\it Journal of | |
| 92 | + Finance}, 2009, {\it 64} (5), 2289--2325. | |
| 93 | + | |
| 94 | +\harvarditem[Hoberg and Phillips]{Hoberg and Phillips}{2010}{hoberg2010product} | |
| 95 | +{\bf Hoberg, Gerard and Gordon Phillips}, ``Product Market Synergies and | |
| 96 | + Competition in Mergers and Acquisitions: A Text-Based Analysis,'' {\it Review | |
| 97 | + of Financial Studies}, 2010, {\it 23} (10), 3773--3811. | |
| 98 | + | |
| 99 | +\harvarditem[Hoberg and Phillips]{Hoberg and | |
| 100 | + Phillips}{2016}{hobergphillips2016} | |
| 101 | +{\bf \bysame{} and \bysame{}}, ``Text-Based Network Industries and Endogenous | |
| 102 | + Product Differentiation,'' {\it Journal of Political Economy}, 2016, {\it | |
| 103 | + 124} (5), 1423--1465. | |
| 104 | + | |
| 105 | +\harvarditem[Kelly et al.]{Kelly, Manela and | |
| 106 | + Moreira}{2021}{kelly2019textregression} | |
| 107 | +{\bf Kelly, Bryan, Asaf Manela, and Alan Moreira}, ``Text Selection,'' {\it | |
| 108 | + Journal of Business \& Economic Statistics}, 2021, {\it 39} (4), 859--879. | |
| 109 | + | |
| 110 | +\harvarditem[Kogan and Papanikolaou]{Kogan and | |
| 111 | + Papanikolaou}{2014}{koganpapanikolaou2014} | |
| 112 | +{\bf Kogan, Leonid and Dimitris Papanikolaou}, ``Growth Opportunities, | |
| 113 | + Technology Shocks, and Asset Prices,'' {\it Journal of Finance}, 2014, {\it | |
| 114 | + 69} (2), 675--718. | |
| 115 | + | |
| 116 | +\harvarditem[Kogan et al.]{Kogan, Papanikolaou, Seru and | |
| 117 | + Stoffman}{2017}{kogan2017technological} | |
| 118 | +{\bf \bysame{}, \bysame{}, Amit Seru, and Noah Stoffman}, ``Technological | |
| 119 | + Innovation, Resource Allocation, and Growth,'' {\it Quarterly Journal of | |
| 120 | + Economics}, 2017, {\it 132} (2), 665--712. | |
| 121 | + | |
| 122 | +\harvarditem[Lopez-Lira]{Lopez-Lira}{2023}{lopezlira2023risk} | |
| 123 | +{\bf Lopez-Lira, Alejandro}, ``Risk Factors That Matter: Textual Analysis of | |
| 124 | + Risk Disclosures for the Cross-Section of Returns,'' Technical Report, | |
| 125 | + Working Paper 2023. | |
| 126 | + | |
| 127 | +\harvarditem[Loughran and McDonald]{Loughran and McDonald}{2011}{lm2011} | |
| 128 | +{\bf Loughran, Tim and Bill McDonald}, ``When Is a Liability Not a Liability? | |
| 129 | + Textual Analysis, Dictionaries, and 10-Ks,'' {\it Journal of Finance}, 2011, | |
| 130 | + {\it 66} (1), 35--65. | |
| 131 | + | |
| 132 | +\harvarditem[Loughran and McDonald]{Loughran and McDonald}{2016}{lm2016} | |
| 133 | +{\bf \bysame{} and \bysame{}}, ``Textual Analysis in Accounting and Finance: A | |
| 134 | + Survey,'' {\it Journal of Accounting Research}, 2016, {\it 54} (4), | |
| 135 | + 1187--1230. | |
| 136 | + | |
| 137 | +\harvarditem[MacKinlay]{MacKinlay}{1997}{mackinlay1997} | |
| 138 | +{\bf MacKinlay, A.~Craig}, ``Event Studies in Economics and Finance,'' {\it | |
| 139 | + Journal of Economic Literature}, 1997, {\it 35} (1), 13--39. | |
| 140 | + | |
| 141 | +\harvarditem[Newey and West]{Newey and West}{1987}{neweywest1987} | |
| 142 | +{\bf Newey, Whitney~K. and Kenneth~D. West}, ``A Simple, Positive | |
| 143 | + Semi-Definite, Heteroskedasticity and Autocorrelation Consistent Covariance | |
| 144 | + Matrix,'' {\it Econometrica}, 1987, {\it 55} (3), 703--708. | |
| 145 | + | |
| 146 | +\harvarditem[P{\'a}stor et al.]{P{\'a}stor, Stambaugh and | |
| 147 | + Taylor}{2021}{pastor2021sustainable} | |
| 148 | +{\bf P{\'a}stor, {\v{L}}ubo{\v{s}}, Robert~F. Stambaugh, and Lucian~A. Taylor}, | |
| 149 | + ``Sustainable Investing in Equilibrium,'' {\it Journal of Financial | |
| 150 | + Economics}, 2021, {\it 142} (2), 550--571. | |
| 151 | + | |
| 152 | +\harvarditem[P{\'a}stor et al.]{P{\'a}stor, Stambaugh and | |
| 153 | + Taylor}{2022}{pastor2022dissecting} | |
| 154 | +{\bf \bysame{}, \bysame{}, and \bysame{}}, ``Dissecting Green Returns,'' {\it | |
| 155 | + Journal of Financial Economics}, 2022, {\it 146} (2), 403--424. | |
| 156 | + | |
| 157 | +\harvarditem[Petersen]{Petersen}{2009}{petersen2009} | |
| 158 | +{\bf Petersen, Mitchell~A.}, ``Estimating Standard Errors in Finance Panel Data | |
| 159 | + Sets: Comparing Approaches,'' {\it Review of Financial Studies}, 2009, {\it | |
| 160 | + 22} (1), 435--480. | |
| 161 | + | |
| 162 | +\harvarditem[Reimers and Gurevych]{Reimers and | |
| 163 | + Gurevych}{2019}{reimers2019sbert} | |
| 164 | +{\bf Reimers, Nils and Iryna Gurevych}, ``Sentence-{BERT}: Sentence Embeddings | |
| 165 | + Using {Siamese} {BERT}-Networks,'' in ``Proceedings of the 2019 Conference on | |
| 166 | + Empirical Methods in Natural Language Processing (EMNLP)'' 2019. | |
| 167 | + | |
| 168 | +\harvarditem[Shiller]{Shiller}{2017}{shiller2017narrative} | |
| 169 | +{\bf Shiller, Robert~J.}, ``Narrative Economics,'' {\it American Economic | |
| 170 | + Review}, 2017, {\it 107} (4), 967--1004. | |
| 171 | + | |
| 172 | +\harvarditem[Tetlock]{Tetlock}{2007}{tetlock2007} | |
| 173 | +{\bf Tetlock, Paul~C.}, ``Giving Content to Investor Sentiment: The Role of | |
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| 175 | + 1139--1168. | |
| 176 | + | |
| 177 | +\harvarditem[Tetlock et al.]{Tetlock, Saar-Tsechansky and | |
| 178 | + Macskassy}{2008}{tetlock2008} | |
| 179 | +{\bf \bysame{}, Maytal Saar-Tsechansky, and Sofus Macskassy}, ``More Than | |
| 180 | + Words: Quantifying Language to Measure Firms' Fundamentals,'' {\it Journal of | |
| 181 | + Finance}, 2008, {\it 63} (3), 1437--1467. | |
| 182 | + | |
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| 184 | +{\bf Webb, Michael}, ``The Impact of Artificial Intelligence on the Labor | |
| 185 | + Market,'' Technical Report, Stanford University Working Paper 2020. | |
| 186 | + | |
| 187 | +\end{thebibliography} | |
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| 6 | +Reallocated singl_function (elt_size=4) to 100 items from 50. | |
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| 1 | +% ============================================================================ | |
| 2 | +% UQO Working Paper Template — Economics / Finance | |
| 3 | +% ============================================================================ | |
| 4 | +\documentclass[12pt,letterpaper]{article} | |
| 5 | + | |
| 6 | +% --- Encoding & Language --- | |
| 7 | +\usepackage[utf8]{inputenc} | |
| 8 | +\usepackage[T1]{fontenc} | |
| 9 | +\usepackage[english]{babel} | |
| 10 | + | |
| 11 | +% --- Page Layout --- | |
| 12 | +\usepackage[ | |
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| 14 | + top=1in, | |
| 15 | + bottom=1in, | |
| 16 | + left=1in, | |
| 17 | + right=1in | |
| 18 | +]{geometry} | |
| 19 | + | |
| 20 | +% --- Typography --- | |
| 21 | +\usepackage{mathptmx} % Times-like font (text + math) | |
| 22 | +\usepackage{microtype} % Improved typographic refinements | |
| 23 | +\usepackage{setspace} | |
| 24 | +\doublespacing % double line spacing (working-paper format) | |
| 25 | + | |
| 26 | +% --- Math --- | |
| 27 | +\usepackage{amsmath,amssymb,amsthm} | |
| 28 | + | |
| 29 | +% --- Tables --- | |
| 30 | +\usepackage{booktabs} | |
| 31 | +\usepackage{tabularx} | |
| 32 | +\usepackage{multirow} | |
| 33 | +\usepackage{threeparttable} | |
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| 37 | + table-format = -1.3, | |
| 38 | + parse-numbers = false | |
| 39 | +} | |
| 40 | + | |
| 41 | +% --- Figures --- | |
| 42 | +\usepackage{graphicx} | |
| 43 | +\usepackage{subcaption} | |
| 44 | +\usepackage{float} | |
| 45 | + | |
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| 52 | + urlcolor = NavyBlue, | |
| 53 | + breaklinks = true | |
| 54 | +]{hyperref} | |
| 55 | + | |
| 56 | +% --- Bibliography --- | |
| 57 | +\usepackage[authoryear,round,semicolon]{natbib} | |
| 58 | +\bibliographystyle{aer} | |
| 59 | + | |
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| 80 | +\titleformat{\subsubsection}{\normalsize\itshape}{\thesubsubsection.}{0.5em}{} | |
| 81 | + | |
| 82 | +% --- Appendix Support --- | |
| 83 | +\usepackage[toc,page]{appendix} | |
| 84 | + | |
| 85 | +% --- Misc --- | |
| 86 | +\usepackage{enumitem} | |
| 87 | +\setlist{nosep,leftmargin=*} | |
| 88 | + | |
| 89 | +% --- Project-specific additions --- | |
| 90 | +\graphicspath{{figures/}} | |
| 91 | +\newcommand{\tstat}[1]{{\footnotesize(\textit{t}=#1)}} | |
| 92 | + | |
| 93 | +% ============================================================================ | |
| 94 | +% METADATA — Edit these fields for each working paper | |
| 95 | +% ============================================================================ | |
| 96 | +\newcommand{\WPnumber}{2026-03} | |
| 97 | +\newcommand{\WPtitle}{Does the Language of Artificial Intelligence Move Markets?} | |
| 98 | +\newcommand{\WPsubtitle}{A Semantic Analysis of S\&P~500 SEC Filings and the Cross-Section of Stock Returns, 2010--2026} | |
| 99 | +\newcommand{\WPdate}{June 2026} | |
| 100 | +\newcommand{\WPversion}{1.0} | |
| 101 | +\newcommand{\WPabstract}{% | |
| 102 | + We construct a \emph{semantic} measure of artificial-intelligence (AI) engagement for every | |
| 103 | + S\&P~500 firm by embedding the text of its annual SEC filings (Form~10-K) with a sentence | |
| 104 | + transformer and scoring each passage by cosine similarity to curated AI ``anchor'' concepts: | |
| 105 | + internal AI adoption, AI infrastructure exposure, and AI product-disruption risk. Linking these | |
| 106 | + scores to monthly equity prices from Yahoo Finance and to the Fama--French factor data, we | |
| 107 | + assemble a panel of 7{,}869 firm-years (500 firms, fiscal years 2010--2026) and ask whether the | |
| 108 | + intensity of AI language predicts the cross-section of subsequent returns. Our central result is | |
| 109 | + \emph{conditional and economically large}: over the full sample the relation is positive but | |
| 110 | + modest and only marginally significant, yet after the launch of ChatGPT (November~2022) it more | |
| 111 | + than sextuples. The spread between the top and bottom quintile of AI disclosure rises from $+2.4$ | |
| 112 | + percentage points per year before 2022 to $+14.6$ points afterward, and the long--short Sharpe | |
| 113 | + ratio rises from 0.15 to 1.33. The break survives section-weighting choices, alternative signal | |
| 114 | + definitions and horizons, dimension reduction, and the exclusion of the ``Magnificent~7'' | |
| 115 | + mega-caps. Three identification tests sharpen the interpretation: (i)~a placebo across five | |
| 116 | + non-AI semantic factors shows the post-2022 jump is specific to AI (ESG and climate disclosure | |
| 117 | + earn \emph{negative} post-2022 spreads); (ii)~a market-model event study finds that firms with | |
| 118 | + higher pre-event AI disclosure earned $+10.1\%$ higher cumulative abnormal returns over the year | |
| 119 | + after ChatGPT ($t=1.97$); and (iii)~the effect is absorbed by firm fixed effects and roughly | |
| 120 | + halved by sector fixed effects. We interpret the evidence as an attention- and narrative-driven | |
| 121 | + \emph{re-rating}: the market repriced which firms and sectors are AI-exposed once AI became | |
| 122 | + salient, rather than rewarding year-to-year changes in wording.% | |
| 123 | +} | |
| 124 | +\newcommand{\WPkeywords}{textual analysis, sentence embeddings, artificial intelligence, disclosure, cross-section of returns, investor attention, event study} | |
| 125 | +\newcommand{\WPjel}{G12, G14, G17, M41, O33} | |
| 126 | + | |
| 127 | +% --- Authors --- | |
| 128 | +\newcommand{\WPauthor}{% | |
| 129 | + \begin{tabular}{c} | |
| 130 | + {\large Manel Kammoun}\\[-0.05cm] | |
| 131 | + {\small\href{mailto:manel.kammoun@uqo.ca}{manel.kammoun@uqo.ca}}\\[0.35cm] | |
| 132 | + {\large Djerrycharli Tandjambianda}\\[-0.05cm] | |
| 133 | + {\small\href{mailto:djerrycharli.tandjambianda@uqo.ca}{djerrycharli.tandjambianda@uqo.ca}}\\[0.35cm] | |
| 134 | + {\large Simon-Pierre Boucher}\\[-0.05cm] | |
| 135 | + {\small\href{mailto:simon-pierre.boucher@uqo.ca}{simon-pierre.boucher@uqo.ca}} | |
| 136 | + \end{tabular}% | |
| 137 | +} | |
| 138 | +\newcommand{\WPaffiliation}{% | |
| 139 | + Département des sciences administratives\\ | |
| 140 | + Université du Québec en Outaouais% | |
| 141 | +} | |
| 142 | +\newcommand{\WPemail}{} | |
| 143 | +\newcommand{\WPaddress}{% | |
| 144 | + Gatineau -- Pavillon Alexandre-Taché\\ | |
| 145 | + 283, boulevard Alexandre-Taché\\ | |
| 146 | + Gatineau, Québec, Canada J9A 1L8% | |
| 147 | +} | |
| 148 | + | |
| 149 | +% ============================================================================ | |
| 150 | +% DOCUMENT | |
| 151 | +% ============================================================================ | |
| 152 | +\begin{document} | |
| 153 | + | |
| 154 | +% --- Title Page --- | |
| 155 | +\input{sections/titlepage} | |
| 156 | + | |
| 157 | +% --- Main Body --- | |
| 158 | +\input{sections/introduction} | |
| 159 | +\input{sections/literature} | |
| 160 | +\input{sections/data} | |
| 161 | +\input{sections/methodology} | |
| 162 | +\input{sections/results} | |
| 163 | +\input{sections/robustness} | |
| 164 | +\input{sections/discussion} | |
| 165 | +\input{sections/conclusion} | |
| 166 | + | |
| 167 | +% --- References --- | |
| 168 | +\newpage | |
| 169 | +\bibliography{references} | |
| 170 | + | |
| 171 | +% --- Appendix --- | |
| 172 | +\input{appendix/appendix} | |
| 173 | + | |
| 174 | +\end{document} | |
added
UQ_WP_template/references.bib
+340 −0
@@ -0,0 +1,340 @@ | ||
| 1 | +% ============================================================================ | |
| 2 | +% References — BibTeX Database | |
| 3 | +% "Does the Language of Artificial Intelligence Move Markets?" | |
| 4 | +% ============================================================================ | |
| 5 | + | |
| 6 | +@article{acemoglu2020wrong, | |
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| 12 | + pages = {2188--2244}, | |
| 13 | + year = {2020} | |
| 14 | +} | |
| 15 | + | |
| 16 | +@article{babina2024aiinvestment, | |
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| 19 | + journal = {Journal of Financial Economics}, | |
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| 21 | + pages = {103745}, | |
| 22 | + year = {2024} | |
| 23 | +} | |
| 24 | + | |
| 25 | +@article{bakerwurgler2006, | |
| 26 | + author = {Baker, Malcolm and Wurgler, Jeffrey}, | |
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| 32 | + year = {2006} | |
| 33 | +} | |
| 34 | + | |
| 35 | +@article{barberodean2008, | |
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| 43 | +} | |
| 44 | + | |
| 45 | +@article{bolton2021risk, | |
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| 53 | +} | |
| 54 | + | |
| 55 | +@article{bybee2024narrative, | |
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| 62 | + year = {2024} | |
| 63 | +} | |
| 64 | + | |
| 65 | +@article{cameron2011, | |
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| 73 | +} | |
| 74 | + | |
| 75 | +@article{cohen2020lazy, | |
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| 77 | + title = {Lazy Prices}, | |
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| 83 | +} | |
| 84 | + | |
| 85 | +@techreport{cong2022textfactor, | |
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| 87 | + title = {Textual Factors: A Scalable, Interpretable, and Data-Driven Approach to Analyzing Unstructured Information}, | |
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| 90 | +} | |
| 91 | + | |
| 92 | +@article{da2011, | |
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| 97 | + number = {5}, | |
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| 99 | + year = {2011} | |
| 100 | +} | |
| 101 | + | |
| 102 | +@article{dellavigna2009, | |
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| 109 | + year = {2009} | |
| 110 | +} | |
| 111 | + | |
| 112 | +@techreport{eisfeldt2023generative, | |
| 113 | + author = {Eisfeldt, Andrea L. and Schubert, Gregor and Zhang, Miao Ben}, | |
| 114 | + title = {Generative {AI} and Firm Values}, | |
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| 116 | + type = {NBER Working Paper}, | |
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| 118 | + year = {2023} | |
| 119 | +} | |
| 120 | + | |
| 121 | +@article{famafrench2015, | |
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| 128 | + year = {2015} | |
| 129 | +} | |
| 130 | + | |
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| 141 | +@article{gentzkow2019, | |
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| 148 | + year = {2019} | |
| 149 | +} | |
| 150 | + | |
| 151 | +@article{hirshleifer2009driven, | |
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| 159 | +} | |
| 160 | + | |
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| 169 | +} | |
| 170 | + | |
| 171 | +@article{hoberg2010product, | |
| 172 | + author = {Hoberg, Gerard and Phillips, Gordon}, | |
| 173 | + title = {Product Market Synergies and Competition in Mergers and Acquisitions: A Text-Based Analysis}, | |
| 174 | + journal = {Review of Financial Studies}, | |
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| 177 | + pages = {3773--3811}, | |
| 178 | + year = {2010} | |
| 179 | +} | |
| 180 | + | |
| 181 | +@article{hobergphillips2016, | |
| 182 | + author = {Hoberg, Gerard and Phillips, Gordon}, | |
| 183 | + title = {Text-Based Network Industries and Endogenous Product Differentiation}, | |
| 184 | + journal = {Journal of Political Economy}, | |
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| 189 | +} | |
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| 199 | +} | |
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| 334 | + | |
| 335 | +@techreport{webb2020, | |
| 336 | + author = {Webb, Michael}, | |
| 337 | + title = {The Impact of Artificial Intelligence on the Labor Market}, | |
| 338 | + institution = {Stanford University Working Paper}, | |
| 339 | + year = {2020} | |
| 340 | +} | |
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UQ_WP_template/sections/conclusion.tex
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| 1 | +% ============================================================================ | |
| 2 | +\section{Conclusion} | |
| 3 | +\label{sec:conclusion} | |
| 4 | +% ============================================================================ | |
| 5 | + | |
| 6 | +Using a semantic, embedding-based measure of artificial-intelligence language in the SEC filings of | |
| 7 | +S\&P~500 firms, linked to Yahoo Finance returns and standard factor data, we have shown that the | |
| 8 | +pricing of AI disclosure is a \emph{conditional, regime-dependent} phenomenon. For most of the 2010s, | |
| 9 | +how intensively a firm wrote about adopting, building, or being threatened by AI bore only a faint | |
| 10 | +relation to its subsequent returns, and a risk-adjusted long--short strategy earned no reliable | |
| 11 | +alpha. After the launch of ChatGPT in late 2022, the same disclosure became strongly priced: the | |
| 12 | +high-minus-low AI-disclosure return spread jumped from roughly $+2$ to roughly $+15$ percentage points | |
| 13 | +per year, and the long--short Sharpe ratio rose from 0.15 to 1.33. | |
| 14 | + | |
| 15 | +The break is robust to signal definition, horizon, dimension reduction, and the exclusion of mega-cap | |
| 16 | +winners; it is specific to AI-related language (ESG and climate disclosure, tested identically, were | |
| 17 | +\emph{penalized} in the same window); it is corroborated by a market-model event study in which | |
| 18 | +high-AI firms earned $+10$ points of additional abnormal return in the year after ChatGPT; and it | |
| 19 | +operates as a cross-sectional re-rating of persistent firm- and sector-level exposure rather than a | |
| 20 | +reward for year-to-year wording, fading under firm fixed effects. | |
| 21 | + | |
| 22 | +The economic message is that markets price the \emph{language} of AI---but only once AI commands their | |
| 23 | +attention. The methodological message is that embedding-based measurement of disclosure content opens | |
| 24 | +a productive avenue for asset pricing, capturing economically meaningful, multi-faceted exposures at | |
| 25 | +scale and revealing pricing dynamics that keyword counts and firm-differenced designs would miss. As | |
| 26 | +generative AI continues to reshape the corporate landscape, the semantic footprint it leaves in | |
| 27 | +mandatory disclosure offers a rich, and now demonstrably value-relevant, signal. Promising next steps | |
| 28 | +include extending the panel beyond the S\&P~500 to mid- and small-cap firms where attention frictions | |
| 29 | +are larger, incorporating earnings-call and patent text as complementary AI-exposure measures, and | |
| 30 | +tracking whether the post-2022 premium persists, decays, or reverses as the AI narrative matures. | |
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UQ_WP_template/sections/data.tex
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| 1 | +% ============================================================================ | |
| 2 | +\section{Data and Variable Construction} | |
| 3 | +\label{sec:data} | |
| 4 | +% ============================================================================ | |
| 5 | + | |
| 6 | +\subsection{The semantic factor panel} | |
| 7 | +\label{subsec:semantic} | |
| 8 | +The backbone of our study is the EDGAR Research Database, an infrastructure that downloads, parses, | |
| 9 | +and semantically scores SEC filings for S\&P~500 firms. For each filing the pipeline (i)~extracts | |
| 10 | +the canonical sections (Risk Factors, MD\&A, legal proceedings, financial statements, and so on); | |
| 11 | +(ii)~splits each section into overlapping text chunks; (iii)~embeds every chunk into a | |
| 12 | +384-dimensional vector with the \texttt{all-MiniLM-L6-v2} sentence transformer; and (iv)~scores each | |
| 13 | +chunk by cosine similarity to a set of \emph{anchor} passages defining eight economic concepts. The | |
| 14 | +anchors are short, deliberately written paragraphs that articulate the concept in natural language; | |
| 15 | +for example, the AI-adoption anchor describes a firm ``internally using artificial intelligence, | |
| 16 | +machine learning, generative AI, large language models, automation, predictive analytics \dots\ to | |
| 17 | +improve productivity, operations, efficiency, decision-making.'' Cosine similarity to such an anchor | |
| 18 | +measures how closely a passage's \emph{meaning} matches the concept, regardless of the exact words | |
| 19 | +used---capturing paraphrase and context in a way keyword counts cannot. | |
| 20 | + | |
| 21 | +Chunk-level scores are aggregated to the filing level using section weights that emphasize the parts | |
| 22 | +of the document where the concept is most likely to be discussed substantively (e.g.\ MD\&A and Risk | |
| 23 | +Factors), and then to the firm-fiscal-year level. For each concept the database reports the mean, | |
| 24 | +maximum, standard deviation, top-5\% tail, and section-weighted mean (\texttt{wmean}) of chunk | |
| 25 | +similarities, along with first and second differences, percentage changes, and three-year rolling | |
| 26 | +statistics. The eight concepts comprise three AI facets---\emph{AI adoption}, \emph{AI | |
| 27 | +infrastructure}, \emph{AI disruption risk}---and five others used as placebos: \emph{ESG commitment}, | |
| 28 | +\emph{climate risk}, \emph{cybersecurity}, \emph{automation/labor}, and \emph{macro risk}. | |
| 29 | + | |
| 30 | +The resulting panel covers all 500 current S\&P~500 members across fiscal years 2010--2026, a total | |
| 31 | +of 7{,}869 firm-years. We take the section-weighted mean (\texttt{wmean}) as our headline signal | |
| 32 | +because it up-weights the forward-looking, strategy-rich sections; we verify robustness to the | |
| 33 | +simple mean and the top-5\% tail in Section~\ref{sec:robustness}. Our three primary signals are | |
| 34 | +therefore \texttt{ai\_adoption\_wmean} (\textbf{AI\,Adopt}), \texttt{ai\_infrastructure\_wmean} | |
| 35 | +(\textbf{AI\,Infra}), and \texttt{ai\_disruption\_risk\_wmean} (\textbf{AI\,Risk}); we also form a | |
| 36 | +standardized opportunity composite, $\text{AI\,Compos}=\tfrac12[z(\text{AI\,Adopt})+z(\text{AI\,Infra})]$. | |
| 37 | + | |
| 38 | +\subsection{Price and factor data} | |
| 39 | +\label{subsec:price} | |
| 40 | +We download monthly adjusted-close prices for all 500 tickers from Yahoo Finance over 2009--2026 | |
| 41 | +(handling share-class tickers such as BRK.B and BF.B), the SPDR S\&P~500 ETF (SPY) as the market | |
| 42 | +benchmark, and the Fama--French five factors \citep{famafrench2015}, the momentum factor, and the | |
| 43 | +risk-free rate from the Kenneth R.\ French data library. Monthly simple returns are computed from | |
| 44 | +adjusted prices, which incorporate dividends and splits. A market-capitalization proxy is formed as | |
| 45 | +shares outstanding (from Yahoo Finance) times the historical price; we use it for value-weighting and | |
| 46 | +as a size control, acknowledging the shares-held-constant approximation. | |
| 47 | + | |
| 48 | +\subsection{Timing and the construction of tradeable returns} | |
| 49 | +\label{subsec:timing} | |
| 50 | +The single most important design choice in a disclosure--return study is timing. A 10-K covering | |
| 51 | +fiscal year $Y$ becomes public only when filed, typically in February or March of year $Y{+}1$. To | |
| 52 | +guarantee that our signal is in the public information set before any return is measured, we follow | |
| 53 | +the Fama--French portfolio convention: signals from fiscal year $Y$ are used to form portfolios at | |
| 54 | +the end of June of $Y{+}1$, and we measure the forward twelve-month return from July of $Y{+}1$ | |
| 55 | +through June of $Y{+}2$. The roughly three-month gap between the typical filing date and June~30 | |
| 56 | +ensures no look-ahead bias even for late filers. After requiring a valid forward return with adequate | |
| 57 | +monthly coverage, we obtain 6{,}852 firm-years spanning formation years 2010--2024, with return | |
| 58 | +realizations extending through mid-2026. | |
| 59 | + | |
| 60 | +\subsection{Controls and standardization} | |
| 61 | +\label{subsec:controls} | |
| 62 | +For each formation year we compute cross-sectional $z$-scores of every signal, so that all | |
| 63 | +coefficients are expressed per cross-sectional standard deviation and the powerful secular rise in AI | |
| 64 | +language (documented below) is differenced out---in any given year we compare firms to their | |
| 65 | +contemporaneous peers. We control for the three workhorse return determinants: \emph{size} (log | |
| 66 | +market-cap proxy), \emph{momentum} (the firm's own return over the twelve months ending at formation, | |
| 67 | +skipping the last month), and \emph{idiosyncratic volatility} (the annualized standard deviation of | |
| 68 | +monthly returns over the trailing year). In regressions, returns and continuous controls are | |
| 69 | +winsorized at the 1st and 99th percentiles to limit the influence of outliers; in portfolio sorts we | |
| 70 | +use raw returns. Appendix~\ref{app:variables} gives precise definitions. | |
| 71 | + | |
| 72 | +\subsection{Summary statistics} | |
| 73 | +\label{subsec:summary} | |
| 74 | +Table~\ref{tab:summ} reports summary statistics for the estimation sample. The average forward | |
| 75 | +twelve-month return is 18.6\% (reflecting the strong 2011--2026 bull market for U.S.\ large caps), | |
| 76 | +with a wide cross-sectional dispersion (standard deviation 41.5\%). The AI signals are small in | |
| 77 | +level---cosine similarities of disclosure to narrow anchors---but exhibit meaningful cross-sectional | |
| 78 | +variation. Table~\ref{tab:corr} reports correlations. Two features stand out. First, the three AI | |
| 79 | +signals are highly collinear (pairwise $\rho$ between 0.75 and 0.86): firms that write more about | |
| 80 | +adopting AI also write more about AI infrastructure and AI risk. They are best understood as three | |
| 81 | +lenses on a single latent construct---\emph{AI salience}---a point we formalize with | |
| 82 | +principal-components analysis in Section~\ref{sec:robustness}. Second, the raw (unconditional) | |
| 83 | +correlation between each AI signal and the forward return is positive but small ($\approx 0.04$), | |
| 84 | +foreshadowing that the unconditional relation is weak and that the action lies in its time variation. | |
| 85 | + | |
| 86 | +\input{tables/tab_summary} | |
| 87 | +\input{tables/tab_corr} | |
| 88 | + | |
| 89 | +\subsection{The secular rise of AI language} | |
| 90 | +\label{subsec:trend} | |
| 91 | +Before turning to returns, Figure~\ref{fig:trend} documents the raw phenomenon that motivates our | |
| 92 | +within-year design. The cross-sectional mean similarity to all three AI concepts trended steadily | |
| 93 | +upward through the 2010s and inflected sharply after 2022; by 2025--2026 AI language saturates | |
| 94 | +S\&P~500 disclosure. This is precisely why our tests rely on within-year cross-sectional ranking: the | |
| 95 | +interesting question is not whether the index as a whole talks more about AI over time (it | |
| 96 | +emphatically does), but whether, \emph{in a given year}, firms that talk about AI more than their | |
| 97 | +peers subsequently earn different returns. Figure~\ref{fig:sectorbox} shows that AI disclosure is | |
| 98 | +also unevenly distributed across sectors, concentrated in Information Technology, Communication | |
| 99 | +Services, and Industrials---a fact that will matter for interpreting the sector channel. | |
| 100 | + | |
| 101 | +\begin{figure}[htbp]\centering | |
| 102 | +\includegraphics[width=0.9\textwidth]{fig4_ai_language_trend.png} | |
| 103 | +\caption{Cross-sectional mean of section-weighted cosine similarity to each AI anchor, by fiscal | |
| 104 | +year. All three measures trend upward and inflect after the 2022 launch of ChatGPT (dashed line).} | |
| 105 | +\label{fig:trend} | |
| 106 | +\end{figure} | |
| 107 | + | |
| 108 | +\begin{figure}[htbp]\centering | |
| 109 | +\includegraphics[width=0.9\textwidth]{fig12_sector_box.png} | |
| 110 | +\caption{Distribution of the AI-adoption score by GICS sector (box plots, outliers suppressed; red | |
| 111 | +line $=$ median). AI disclosure is concentrated in technology-intensive sectors.} | |
| 112 | +\label{fig:sectorbox} | |
| 113 | +\end{figure} | |
| 114 | + | |
| 115 | +\subsection{Which firms disclose the most AI? Descriptive evidence} | |
| 116 | +\label{subsec:topfirms} | |
| 117 | +Table~\ref{tab:topfirms} lists the ten most AI-intensive S\&P~500 firms by average AI-adoption score | |
| 118 | +over the full sample. The list is instructive in two ways. First, it has strong face validity: it | |
| 119 | +features enterprise-technology and software firms (Hewlett Packard Enterprise, Intel, IBM, Tyler | |
| 120 | +Technologies, Autodesk), an algorithm-centric platform (Uber), and data-intensive financials (BNY | |
| 121 | +Mellon, Berkshire Hathaway), exactly the kinds of firms one would expect to write substantively about | |
| 122 | +deploying AI. Second, the list is \emph{not} confined to the technology sector: industrials (Cummins) | |
| 123 | +and energy (EOG Resources) appear, confirming that intensive AI disclosure cuts across the GICS | |
| 124 | +taxonomy and that our continuous, text-based measure captures variation a sector dummy would miss. | |
| 125 | + | |
| 126 | +A further descriptive fact is central to our interpretation: the AI signal is highly | |
| 127 | +\emph{persistent}. The year-over-year cross-sectional rank autocorrelation of the AI composite is | |
| 128 | +0.88, and even at a five-year horizon it remains 0.73. Firms that are AI-intensive disclosers stay | |
| 129 | +AI-intensive; the measure captures a slow-moving structural characteristic of the firm rather than | |
| 130 | +transient wording. This persistence has two implications we exploit later: it explains why firm fixed | |
| 131 | +effects absorb most of the signal (there is little within-firm variation to identify), and it | |
| 132 | +underpins the difference-in-differences design, in which we fix each firm's exposure at its pre-event | |
| 133 | +level precisely because that level is stable. | |
| 134 | + | |
| 135 | +\input{tables/tab_topfirms} | |
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UQ_WP_template/sections/discussion.tex
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| 1 | +% ============================================================================ | |
| 2 | +\section{Discussion: Mechanism and Interpretation} | |
| 3 | +\label{sec:discussion} | |
| 4 | +% ============================================================================ | |
| 5 | + | |
| 6 | +What economic mechanism best fits this constellation of facts? We find an attention- and | |
| 7 | +narrative-driven repricing the most parsimonious explanation, and we read the evidence as follows. | |
| 8 | + | |
| 9 | +\paragraph{The information pre-existed; the attention did not.} Firms disclosed their AI engagement | |
| 10 | +for years before it was priced. The semantic content of those disclosures was, in cross-section, only | |
| 11 | +faintly related to returns through 2021. What changed in late 2022 was not the information but its | |
| 12 | +\emph{salience}: a consumer breakthrough (ChatGPT) made AI the dominant market narrative | |
| 13 | +\citep{shiller2017narrative}, drawing investor attention \citep{da2011,barberodean2008} to a body of | |
| 14 | +disclosure that had been hiding in plain sight. The abrupt, near-simultaneous repricing across the | |
| 15 | +cross-section---visible in the event study within months of the launch---is the signature of an | |
| 16 | +attention shock rather than the gradual accrual of a risk premium. | |
| 17 | + | |
| 18 | +\paragraph{It is a re-rating of levels, not of changes.} The disappearance of the effect under firm | |
| 19 | +fixed effects, the muted difference-in-differences estimates, and the event-time profile all point the | |
| 20 | +same way: the market repriced the persistent \emph{level} of a firm's AI exposure, not the | |
| 21 | +year-to-year change in its wording. This has a clear practical corollary---firms cannot mechanically | |
| 22 | +earn the premium by adding AI boilerplate to their filings (and our top-5\% and simple-mean | |
| 23 | +robustness suggests the measure is not easily gamed)---and a clear methodological one: studies that | |
| 24 | +difference out firm effects will understate the cross-sectional importance of disclosure content. | |
| 25 | + | |
| 26 | +\paragraph{It operates substantially, but not entirely, through sectors.} The sector-neutral and | |
| 27 | +sector-fixed-effects results show that much of the AI premium reflects the re-rating of AI-exposed | |
| 28 | +\emph{sectors}---technology, communication services, and the industrial firms supplying the AI | |
| 29 | +build-out---relative to the rest of the index. This is economically sensible: the generative-AI boom | |
| 30 | +was, to first order, a sectoral reallocation of expected cash flows and valuations. Yet a positive | |
| 31 | +within-sector residual remains in the event study, indicating that the firm's own disclosure carried | |
| 32 | +incremental information even among industry peers. | |
| 33 | + | |
| 34 | +\paragraph{The thematic asymmetry is telling.} Perhaps the most revealing single fact is the placebo: | |
| 35 | +in the very same post-2022 window, high-AI firms were rewarded while high-ESG and high-climate firms | |
| 36 | +were penalized. Markets did not simply reward verbose or virtuous-sounding disclosure; they rotated | |
| 37 | +toward one theme (AI) and away from another (sustainability). This is difficult to reconcile with a | |
| 38 | +purely mechanical or risk-based account and natural under a narrative-rotation view of investor | |
| 39 | +attention. | |
| 40 | + | |
| 41 | +\paragraph{Relation to the AI-asset-pricing literature.} Our findings complement | |
| 42 | +\citet{eisfeldt2023generative}, who show that an occupation-task measure of generative-AI exposure was | |
| 43 | +priced around ChatGPT. We reach a convergent conclusion from an entirely different measurement---firms' | |
| 44 | +own disclosure language---and extend it along the time dimension, showing that the same exposure was | |
| 45 | +\emph{un}priced for a decade beforehand. The agreement of two independent measures on the timing and | |
| 46 | +sign of the effect strengthens confidence that a real AI repricing occurred. | |
| 47 | + | |
| 48 | +\subsection{Implications} | |
| 49 | +Our findings carry distinct implications for three audiences. \emph{For investors and quantitative | |
| 50 | +strategists}, the results are a caution as much as an opportunity. The AI-disclosure signal delivered | |
| 51 | +a striking post-2022 Sharpe ratio, but the same signal was nearly inert for the preceding decade, and | |
| 52 | +the effect is absorbed by firm fixed effects---so a strategy that traded on year-to-year changes in AI | |
| 53 | +verbosity would have captured little. The tradeable content lies in the persistent cross-sectional | |
| 54 | +\emph{level} of AI exposure, and even that is partly a sector bet whose durability is unproven. The | |
| 55 | +honest reading is that disclosure-based AI signals are best viewed as a lens on a regime-dependent | |
| 56 | +theme rather than as a stable alpha source. \emph{For corporate managers and disclosure policy}, the | |
| 57 | +asymmetry between AI (rewarded) and ESG/climate (penalized) after 2022 illustrates how powerfully the | |
| 58 | +prevailing market narrative conditions the valuation consequences of what firms choose to emphasize. | |
| 59 | +Because the premium attaches to persistent, hard-to-fake exposure rather than to boilerplate, the | |
| 60 | +result does not invite cheap disclosure manipulation; but it does suggest that the market reads | |
| 61 | +filings for genuine strategic content and reprices it when attention turns. \emph{For researchers}, | |
| 62 | +the study demonstrates that embedding-based semantic measurement uncovers pricing dynamics invisible | |
| 63 | +to both keyword counts (which cannot distinguish meaning) and firm-differenced panels (which discard | |
| 64 | +the persistent cross-sectional variation that turns out to matter). | |
| 65 | + | |
| 66 | +\subsection{Summary of the evidence across designs} | |
| 67 | +It is worth stepping back to see how the designs corroborate one another, since each has different | |
| 68 | +weaknesses. The portfolio sorts establish the raw magnitude and its post-2022 timing but are | |
| 69 | +model-free and could in principle reflect risk; the factor-model spanning regressions show the | |
| 70 | +unconditional spread is not explained by standard factors yet is statistically weak over the full | |
| 71 | +sample; the sub-period and interaction tests localize the effect to the post-ChatGPT regime; the | |
| 72 | +placebo rules out a mechanical or generic-disclosure explanation by showing the opposite sign for ESG | |
| 73 | +and climate; the event study, using daily abnormal returns purged of beta, provides cleanly-timed, | |
| 74 | +cross-sectional confirmation within months of the catalyst; and the fixed-effects and | |
| 75 | +difference-in-differences estimates pin down that the priced object is persistent firm- and | |
| 76 | +sector-level exposure, not incremental wording. No single design is decisive, but their | |
| 77 | +convergence---on the same sign, the same timing, and a consistent economic story---is what gives us | |
| 78 | +confidence in the conclusion. | |
| 79 | + | |
| 80 | +\subsection{Limitations} | |
| 81 | +\label{subsec:limits} | |
| 82 | +Several caveats temper our conclusions. \emph{First}, the post-2022 window contains only three | |
| 83 | +formation cohorts, and the size-controlled premium is concentrated in the most recent (2024) cohort, | |
| 84 | +which captures the 2024--2025 AI-infrastructure capital-expenditure boom. The regime result is | |
| 85 | +economically large and consistent across designs, but its post-period rests on a short sample and | |
| 86 | +could in principle reflect a single extraordinary episode rather than a durable new regime; only | |
| 87 | +future data can settle this. \emph{Second}, our universe is current S\&P~500 membership, which | |
| 88 | +introduces survivorship and look-ahead-at-the-index-level bias. This biases the level of returns | |
| 89 | +upward but is less likely to drive the \emph{cross-sectional} AI--return relation that is our focus. | |
| 90 | +\emph{Third}, the market-capitalization proxy holds shares outstanding at their latest value, | |
| 91 | +approximating historical size with error. \emph{Fourth}, the semantic anchors, though carefully | |
| 92 | +written, embed the authors' definitional choices; different anchor wording would yield somewhat | |
| 93 | +different scores, although the robustness to mean/tail aggregations and to PCA mitigates this concern. | |
| 94 | +\emph{Fifth}, disclosure intensity is correlated with sector, and while our within-year, size-, | |
| 95 | +momentum-, and volatility-controlled tests and the sector-FE event study address this, we cannot fully | |
| 96 | +separate ``AI exposure'' from ``technology sector'' as the priced characteristic. \emph{Finally}, our | |
| 97 | +designs establish a robust association and an event-study-based timing argument, but not strict | |
| 98 | +causality; the attention-repricing interpretation is the most consistent with the evidence rather than | |
| 99 | +the only logically possible one. | |
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UQ_WP_template/sections/introduction.tex
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| 1 | +% ============================================================================ | |
| 2 | +\section{Introduction} | |
| 3 | +\label{sec:introduction} | |
| 4 | +% ============================================================================ | |
| 5 | + | |
| 6 | +The arrival of generative artificial intelligence has been the defining corporate-narrative shift | |
| 7 | +of the 2020s. Between the public launch of ChatGPT in late 2022 and 2025, the market | |
| 8 | +capitalization of AI-linked firms swelled by trillions of dollars, ``AI'' became the most | |
| 9 | +frequently invoked theme on earnings calls, and the language of corporate disclosure filled with | |
| 10 | +references to large language models, generative tools, intelligent automation, and the compute | |
| 11 | +infrastructure that powers them. This paper asks a deceptively simple question: did the | |
| 12 | +\emph{language} of AI in firms' mandatory disclosures carry information about their subsequent | |
| 13 | +stock returns---and if so, when and through what channel? | |
| 14 | + | |
| 15 | +Answering this question well requires three ingredients that have only recently become jointly | |
| 16 | +feasible: a large, machine-readable corpus of corporate disclosure; a measurement technology that | |
| 17 | +captures the \emph{meaning} of text rather than the mere frequency of keywords; and a clean mapping | |
| 18 | +from disclosure to tradeable returns. We bring all three to bear. Our laboratory is the universe of | |
| 19 | +S\&P~500 constituents over fiscal years 2010--2026. Our raw material is the full text of their | |
| 20 | +annual reports (Form~10-K), parsed section by section. Our measurement engine is the EDGAR Research | |
| 21 | +Database, which embeds every text chunk with the \texttt{all-MiniLM-L6-v2} sentence transformer and | |
| 22 | +scores it by cosine similarity to a set of carefully written ``anchor'' passages that define eight | |
| 23 | +economic concepts. Three of these anchors isolate distinct facets of AI engagement: \emph{internal | |
| 24 | +AI adoption} (using AI to run the business), \emph{AI infrastructure exposure} (capital tied to AI | |
| 25 | +compute), and \emph{AI product-disruption risk} (the danger that AI commoditizes the firm's | |
| 26 | +offerings). The result is a continuous, comparable, firm-year measure of how intensively---and in | |
| 27 | +what sense---each firm engages with AI in its own words. | |
| 28 | + | |
| 29 | +We pair these semantic scores with monthly adjusted prices for all 500 tickers from Yahoo Finance | |
| 30 | +and with the Fama--French five factors plus momentum. To avoid look-ahead bias we adopt the | |
| 31 | +standard portfolio-formation convention: because a 10-K covering fiscal year $Y$ is public by early | |
| 32 | +in year $Y{+}1$, we form signals at the end of June of $Y{+}1$ and measure the forward twelve-month | |
| 33 | +return from July of $Y{+}1$ to June of $Y{+}2$. The signal is therefore always known before the | |
| 34 | +holding period begins. This yields 6{,}852 firm-years with a strictly tradeable forward return, | |
| 35 | +spanning formation years 2010 through 2024. | |
| 36 | + | |
| 37 | +Our headline finding is that the pricing of AI language is \emph{not} a stable factor premium but a | |
| 38 | +regime-dependent re-rating that switched on with the generative-AI boom. For most of the 2010s, | |
| 39 | +sorting S\&P~500 firms on the intensity of their AI disclosure produced only a faint return | |
| 40 | +pattern: the equal-weighted spread between the highest and lowest quintiles averaged about $+2.4$ | |
| 41 | +percentage points per year, and a risk-adjusted long--short portfolio earned an economically small | |
| 42 | +and statistically insignificant alpha. After the launch of ChatGPT in November 2022, the same sort | |
| 43 | +produced a spread of $+14.6$ percentage points per year. The cross-sectional re-rating is visible | |
| 44 | +in every post-2022 formation cohort, in a cumulative long--short wealth curve that inflects sharply | |
| 45 | +upward at the end of 2022, and in a year-by-year Fama--MacBeth slope that jumps from near zero to | |
| 46 | +large and positive. | |
| 47 | + | |
| 48 | +A natural worry is that this pattern simply reflects the well-known rally of a handful of | |
| 49 | +technology mega-caps. We address this concern head-on and reject it. The post-2022 spread is | |
| 50 | +$+14.1$ percentage points \tstat{1.9} when the ``Magnificent~7'' are excluded and $+14.5$ points | |
| 51 | +when the ten largest firms by market capitalization are dropped---the effect is broad-based across | |
| 52 | +the index, not an artifact of Nvidia, Microsoft, or their peers. It is robust to using the simple | |
| 53 | +mean, the section-weighted mean, or the top-5\% tail of similarity scores; to six-, twelve-, and | |
| 54 | +twenty-four-month horizons; and to replacing the three AI signals with their first principal | |
| 55 | +component, which alone explains 87\% of their common variation. | |
| 56 | + | |
| 57 | +We then deploy three complementary tests to pin down what the result is---and is not. First, a | |
| 58 | +\emph{placebo} exercise re-runs the entire design on the five non-AI semantic factors in the | |
| 59 | +database (ESG, climate, cybersecurity, automation/labor, and macro risk). If the post-2022 jump | |
| 60 | +merely reflected a generic ``more disclosure earns more'' phenomenon, or a mechanical artifact of | |
| 61 | +our pipeline, every factor should display it. They do not. The post-2022 spread is large and | |
| 62 | +positive for the AI factors, essentially zero for macro-risk language, and \emph{negative} for ESG | |
| 63 | +and climate disclosure---high-ESG firms \emph{underperformed} after 2022. The post-ChatGPT | |
| 64 | +re-rating is specific to AI-related content. Second, we run a market-model \emph{event study} around | |
| 65 | +the 30~November 2022 ChatGPT launch. Firms in the top tercile of pre-event AI disclosure (measured | |
| 66 | +from their FY2021 10-K, the last report filed before the event) earned cumulative abnormal returns | |
| 67 | +$+10.1$ percentage points higher than the bottom tercile over the following year \tstat{1.97} and | |
| 68 | +$+14.6$ points higher over eighteen months. Because abnormal returns are purged of market-beta | |
| 69 | +exposure, this is a clean cross-sectional response to an unanticipated narrative shock. Third, we | |
| 70 | +use two-way fixed effects and difference-in-differences to localize the mechanism. The premium is | |
| 71 | +absorbed by firm fixed effects and roughly halved by sector fixed effects, telling us that the | |
| 72 | +durable signal is the persistent \emph{level} of a firm's (and its sector's) AI exposure relative | |
| 73 | +to peers, not the year-to-year wiggle in its wording. | |
| 74 | + | |
| 75 | +Taken together, the evidence supports an attention- and narrative-driven repricing interpretation. | |
| 76 | +The textual evidence of firms' AI engagement accumulated quietly for a decade and was barely priced. | |
| 77 | +A salient catalyst---the consumer breakthrough of generative AI---then drew investor attention to | |
| 78 | +that pre-existing information, and capital flowed toward the firms and sectors whose disclosures | |
| 79 | +revealed the greatest AI exposure. This is the asset-pricing signature of limited attention and | |
| 80 | +narrative economics, observed not through a sentiment proxy but directly in the semantic content of | |
| 81 | +mandatory disclosure. | |
| 82 | + | |
| 83 | +\paragraph{Contribution.} We make four contributions. \emph{First}, methodologically, we | |
| 84 | +demonstrate the value of embedding-based semantic measurement of disclosure for asset pricing: a | |
| 85 | +cosine-similarity-to-anchor design captures economically meaningful, multi-faceted exposure | |
| 86 | +(adoption vs.\ infrastructure vs.\ risk) that keyword counts cannot, and it does so at scale across | |
| 87 | +the entire S\&P~500 and a decade and a half of filings. \emph{Second}, substantively, we provide | |
| 88 | +text-based, look-ahead-free evidence that the cross-sectional pricing of AI exposure is a post-2022 | |
| 89 | +regime phenomenon rather than a long-standing premium. \emph{Third}, we discipline the finding with | |
| 90 | +a placebo across non-AI factors and an event study, distinguishing a genuine AI-specific repricing | |
| 91 | +from a mechanical or market-wide artifact. \emph{Fourth}, we document the \emph{anatomy} of the | |
| 92 | +effect---its concentration in smaller firms, its operation substantially through a sector channel, | |
| 93 | +and its disappearance under firm fixed effects---which sharpens the economic interpretation and | |
| 94 | +warns against naive trading strategies. | |
| 95 | + | |
| 96 | +The remainder of the paper is organized as follows. Section~\ref{sec:literature} situates the study | |
| 97 | +in five literatures and states our hypotheses. Section~\ref{sec:data} describes the data and the | |
| 98 | +construction of the semantic measures. Section~\ref{sec:methodology} lays out the empirical | |
| 99 | +methodology. Section~\ref{sec:results} presents the main results, and Section~\ref{sec:robustness} | |
| 100 | +the robustness and identification tests. Section~\ref{sec:discussion} discusses mechanisms and | |
| 101 | +limitations, and Section~\ref{sec:conclusion} concludes. | |
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UQ_WP_template/sections/literature.tex
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| 1 | +% ============================================================================ | |
| 2 | +\section{Related Literature and Hypotheses} | |
| 3 | +\label{sec:literature} | |
| 4 | +% ============================================================================ | |
| 5 | + | |
| 6 | +Our study sits at the intersection of five strands of research: textual analysis in finance, the | |
| 7 | +pricing of corporate disclosure, technology and innovation in asset pricing, investor attention and | |
| 8 | +narrative economics, and the nascent literature on the economics of artificial intelligence. | |
| 9 | + | |
| 10 | +\subsection{Textual analysis and natural language processing in finance} | |
| 11 | +A now-large literature extracts economic signals from financial text. The foundational work of | |
| 12 | +\citet{tetlock2007} showed that the tone of a \textit{Wall Street Journal} column forecasts | |
| 13 | +aggregate returns, and \citet{tetlock2008} extended this to firm-level news. \citet{lm2011} | |
| 14 | +demonstrated that finance-specific sentiment dictionaries materially outperform general-purpose word | |
| 15 | +lists in 10-K analysis, launching a wave of dictionary-based studies and the widely used | |
| 16 | +Loughran--McDonald word lists; \citet{lm2016} survey this field. A second generation moved from | |
| 17 | +counting words to modeling them: \citet{gentzkow2019} review text-as-data methods in economics, | |
| 18 | +while \citet{kelly2019textregression} and \citet{bybee2024narrative} use machine-learning | |
| 19 | +representations of news to construct interpretable factors and a ``state of the economy'' from text. | |
| 20 | +Our paper belongs to the most recent, embedding-based generation. Rather than counting AI | |
| 21 | +keywords---which conflate ``we use no AI'' with ``we are an AI leader'' and miss paraphrase---we | |
| 22 | +measure the \emph{semantic similarity} of disclosure to anchor concepts using a sentence transformer | |
| 23 | +\citep{reimers2019sbert}. This follows a growing practice of using contextual embeddings to quantify | |
| 24 | +disclosure content \citep{cong2022textfactor}, and is closest in spirit to similarity-to-concept | |
| 25 | +designs that score documents against reference passages. | |
| 26 | + | |
| 27 | +\subsection{The pricing of corporate disclosure} | |
| 28 | +A parallel literature asks whether the \emph{content} and \emph{changes} of mandatory disclosure | |
| 29 | +predict returns. \citet{cohen2020lazy} show that firms that change the language of their 10-K | |
| 30 | +relative to the prior year (``lazy prices'' when they do not) experience predictable future returns | |
| 31 | +and operating outcomes. \citet{hoberg2010product} and \citet{hobergphillips2016} use 10-K product | |
| 32 | +descriptions to build text-based industry classifications and measures of product-market fluidity | |
| 33 | +that carry asset-pricing content. \citet{lopezlira2023risk} extracts risk exposures from 10-K | |
| 34 | +risk-factor sections. The general lesson is that the qualitative portions of filings contain | |
| 35 | +value-relevant information that markets process incompletely and with delay. We contribute a | |
| 36 | +focused, concept-level measure---AI engagement---and show that its pricing is strongly | |
| 37 | +state-dependent, a dimension the disclosure-pricing literature has largely left implicit. | |
| 38 | + | |
| 39 | +\subsection{Technology, innovation, and the cross-section of returns} | |
| 40 | +Asset pricing has long sought to connect technological change to risk and return. | |
| 41 | +\citet{hirshleifer2013innovative} show that innovative efficiency predicts returns; | |
| 42 | +\citet{kogan2017technological} build market-based measures of innovation from patents and link them | |
| 43 | +to growth and reallocation; \citet{koganpapanikolaou2014} show that investment-specific technology | |
| 44 | +shocks shape the cross-section. A more recent literature studies AI exposure directly: | |
| 45 | +\citet{babina2024aiinvestment} measure firm-level AI investment from job-posting and resume data and | |
| 46 | +document faster growth among AI-adopting firms; \citet{eisfeldt2023generative} construct a | |
| 47 | +firm-level measure of \emph{generative}-AI exposure from the task content of occupations and show | |
| 48 | +that a generative-AI factor was priced precisely in the weeks around ChatGPT's release. | |
| 49 | +\citet{acemoglu2020wrong} and \citet{webb2020} study the labor-market exposure of firms to AI and | |
| 50 | +automation. Our contribution relative to this work is to measure AI exposure from the firm's | |
| 51 | +\emph{own disclosure}---a self-reported, narrative signal available for the entire index at annual | |
| 52 | +frequency---and to characterize the full time profile of its pricing across a decade and a half, not | |
| 53 | +only the event window. Where \citet{eisfeldt2023generative} use occupation-task exposure, we use the | |
| 54 | +language firms choose, providing a complementary and highly granular measure. | |
| 55 | + | |
| 56 | +\subsection{Investor attention, salience, and narrative economics} | |
| 57 | +Why might value-relevant disclosure be priced only after a catalyst? The behavioral literature | |
| 58 | +offers a clear mechanism: limited investor attention. \citet{barberodean2008} show that retail | |
| 59 | +investors are drawn to attention-grabbing stocks; \citet{da2011} construct a direct attention proxy | |
| 60 | +from Google search and link it to prices; \citet{dellavigna2009} document under-reaction to | |
| 61 | +information released when attention is low; and \citet{hirshleifer2009driven} show that earnings news | |
| 62 | +is underweighted when investors are distracted. \citet{shiller2017narrative} argues that contagious | |
| 63 | +narratives drive major asset-price movements, and \citet{bakerwurgler2006} show that sentiment | |
| 64 | +differentially affects hard-to-value, speculative stocks. Our results provide a sharp illustration: | |
| 65 | +the information about firms' AI engagement existed in filings for years but was repriced abruptly | |
| 66 | +when a salient consumer event---ChatGPT---focused investor attention on AI. The asymmetry we document | |
| 67 | +(AI rewarded, ESG penalized after 2022) is itself consistent with a shift in the prevailing market | |
| 68 | +narrative. | |
| 69 | + | |
| 70 | +\subsection{ESG and climate disclosure as a comparison case} | |
| 71 | +Finally, our placebo design connects to the literature on the pricing of ESG and climate disclosure. | |
| 72 | +\citet{pastor2021sustainable} model how sustainability preferences depress the expected returns of | |
| 73 | +green assets in equilibrium, and \citet{pastor2022dissecting} show that green stocks' strong | |
| 74 | +\emph{realized} returns through 2021 reflected unexpected increases in climate concern rather than | |
| 75 | +high expected returns. \citet{bolton2021risk} document a carbon premium. Consistent with the | |
| 76 | +post-2021 reversal in this literature, we find that high-ESG and high-climate disclosure earned | |
| 77 | +\emph{negative} spreads after 2022, exactly when AI disclosure began to earn large positive | |
| 78 | +ones---underscoring that the post-2022 re-rating reflects a thematic rotation toward AI rather than a | |
| 79 | +generic disclosure effect. | |
| 80 | + | |
| 81 | +\subsection{Hypotheses} | |
| 82 | +\label{subsec:hypotheses} | |
| 83 | +Our analysis is organized around four hypotheses. | |
| 84 | +\begin{description}[leftmargin=2.4em,style=nextline] | |
| 85 | +\item[H1 (Unconditional pricing).] If AI exposure carries a stable risk premium or persistent | |
| 86 | +mispricing, then sorting on AI-disclosure intensity yields a positive and significant risk-adjusted | |
| 87 | +return spread over the full 2010--2026 sample. | |
| 88 | +\item[H2 (Regime dependence).] If instead AI exposure is repriced only once AI becomes salient, the | |
| 89 | +return spread is small before and large after the late-2022 generative-AI catalyst, with a | |
| 90 | +detectable structural break. | |
| 91 | +\item[H3 (AI-specificity).] If the post-2022 spread reflects a genuine AI repricing rather than a | |
| 92 | +mechanical or market-wide artifact, it appears for AI-related semantic factors but not for unrelated | |
| 93 | +factors (e.g.\ ESG, climate, macro risk). | |
| 94 | +\item[H4 (Cross-sectional, not within-firm).] If the market repriced \emph{which} firms are | |
| 95 | +AI-exposed rather than rewarding incremental wording, the effect is concentrated in the | |
| 96 | +cross-section and attenuates under firm and sector fixed effects. | |
| 97 | +\end{description} | |
| 98 | +\noindent The data, as we show, decisively favor H2--H4 over H1. | |
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UQ_WP_template/sections/methodology.tex
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| 1 | +% ============================================================================ | |
| 2 | +\section{Methodology} | |
| 3 | +\label{sec:methodology} | |
| 4 | +% ============================================================================ | |
| 5 | + | |
| 6 | +We bring six complementary research designs to bear, ranging from simple portfolio sorts to a | |
| 7 | +market-model event study. Using multiple designs with different identifying assumptions guards | |
| 8 | +against any single method's weaknesses and lets us triangulate the economic interpretation. | |
| 9 | + | |
| 10 | +\subsection{Portfolio sorts} | |
| 11 | +Each formation year we sort firms into quintiles on a given (within-year standardized) AI signal and | |
| 12 | +compute the equal-weighted (EW) and value-weighted (VW) forward return of each quintile, plus the | |
| 13 | +high-minus-low (Q5$-$Q1) spread. We report the time-series average of the annual spreads and test its | |
| 14 | +significance with Newey--West \citep{neweywest1987} standard errors (three lags) to account for any | |
| 15 | +serial correlation in the overlapping return windows. Sorts are model-free and transparent, and the | |
| 16 | +EW--VW comparison reveals whether an effect is concentrated in larger or smaller firms. | |
| 17 | + | |
| 18 | +\subsection{Factor-model spanning of a long--short portfolio} | |
| 19 | +To ask whether the AI spread survives risk adjustment, we build an annually rebalanced, equal-weighted, | |
| 20 | +self-financing long--short portfolio (top minus bottom quintile), record its monthly return, and | |
| 21 | +regress it on (i)~the CAPM market factor and (ii)~the Fama--French five factors plus momentum (FF6). | |
| 22 | +The intercept (alpha) measures the average return unexplained by known risk factors; we use | |
| 23 | +heteroskedasticity- and autocorrelation-consistent (HAC) standard errors. A significant alpha would | |
| 24 | +indicate pricing beyond standard exposures. | |
| 25 | + | |
| 26 | +\subsection{Two-way fixed-effects panel regressions} | |
| 27 | +We estimate | |
| 28 | +\begin{equation} | |
| 29 | + r_{i,t\to t+12} = \beta\, \text{AI}_{i,t} + \gamma' X_{i,t} + \alpha_i + \delta_t + \varepsilon_{i,t}, | |
| 30 | + \label{eq:panel} | |
| 31 | +\end{equation} | |
| 32 | +where $r$ is the winsorized forward return, $\text{AI}_{i,t}$ the standardized signal, $X$ the | |
| 33 | +controls, and $\alpha_i,\delta_t$ firm and year fixed effects. Standard errors are double-clustered by | |
| 34 | +firm and year \citep{petersen2009,cameron2011}. Firm fixed effects absorb all time-invariant | |
| 35 | +cross-firm differences, so $\beta$ identifies whether \emph{within-firm} changes in AI language | |
| 36 | +predict returns; year fixed effects absorb common shocks. Contrasting this estimate with the | |
| 37 | +cross-sectional ones isolates whether the signal lives across or within firms (H4). | |
| 38 | + | |
| 39 | +\subsection{Fama--MacBeth regressions} | |
| 40 | +We also run annual cross-sectional regressions of the forward return on the AI signal and controls and | |
| 41 | +average the slopes following \citet{famamacbeth1973}, with Newey--West errors on the time series of | |
| 42 | +coefficients. This estimator weights each year equally and yields an interpretable | |
| 43 | +per-standard-deviation premium; plotting the annual slopes reveals the time profile of the premium | |
| 44 | +directly. | |
| 45 | + | |
| 46 | +\subsection{Structural-break and difference-in-differences designs} | |
| 47 | +To test regime dependence (H2) we split the sample at the 30~November 2022 ChatGPT launch and compare | |
| 48 | +sub-period spreads, and we estimate pooled interaction models of the form | |
| 49 | +$r = \beta_1 \text{AI} + \beta_2 (\text{AI}\times \text{Post}) + \gamma' X + \varepsilon$, where | |
| 50 | +$\text{Post}=\mathbb{1}[\text{formation year}\ge 2022]$ and $\beta_2$ captures the change in the | |
| 51 | +premium. We complement this with a difference-in-differences design in which treatment is the firm's | |
| 52 | +\emph{pre-determined} AI exposure---fixed at its 2019--2021 average so it cannot respond to the | |
| 53 | +event---interacted with Post, within firm and year fixed effects. An event-time version interacts | |
| 54 | +pre-determined exposure with each year dummy (relative to 2021) to trace the dynamic response. | |
| 55 | + | |
| 56 | +\subsection{Market-model event study} | |
| 57 | +Finally, we run a classic event study \citep{mackinlay1997} around the ChatGPT launch. For each stock | |
| 58 | +we estimate a market model ($r_{i,d}=a_i+b_i r^{m}_{d}+e_{i,d}$) over the estimation window | |
| 59 | +January--October 2022 and compute daily abnormal returns $\text{AR}_{i,d}=r_{i,d}-(\hat a_i+\hat b_i | |
| 60 | +r^m_d)$ over the event window November 2022--June 2024. Cumulative abnormal returns (CAR) are compared | |
| 61 | +across terciles of \emph{pre-event} AI disclosure (from the FY2021 10-K), and we regress firm-level | |
| 62 | +CAR on pre-event exposure with size, beta, and sector controls. Because abnormal returns net out | |
| 63 | +market-beta exposure, the event study isolates the cross-sectional response to the AI-narrative shock | |
| 64 | +from the contemporaneous (and initially negative) market drift of 2022--2023. | |
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UQ_WP_template/sections/results.tex
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| 1 | +% ============================================================================ | |
| 2 | +\section{Results} | |
| 3 | +\label{sec:results} | |
| 4 | +% ============================================================================ | |
| 5 | + | |
| 6 | +\subsection{Portfolio sorts: a weak unconditional relation} | |
| 7 | +Table~\ref{tab:sorts} reports the quintile sorts over the full sample. The relation between AI | |
| 8 | +disclosure and future returns is positive and broadly monotone but economically modest. The | |
| 9 | +equal-weighted Q5$-$Q1 spread is $+4.6$ percentage points per year for AI adoption \tstat{1.83}, | |
| 10 | +$+3.9$ for AI infrastructure \tstat{1.58}, $+5.3$ for AI disruption risk \tstat{2.27}, and $+4.9$ for | |
| 11 | +the composite \tstat{1.88}. Value-weighting attenuates the adoption and composite spreads, indicating | |
| 12 | +the effect is stronger among smaller index members. The left panel of Figure~\ref{fig:quint} displays | |
| 13 | +the full-sample pattern: returns rise gently from the lowest to the highest AI quintile. On its own, | |
| 14 | +this is suggestive but far from decisive evidence---and, as we now show, it averages over two very | |
| 15 | +different regimes. | |
| 16 | + | |
| 17 | +\input{tables/tab_sorts} | |
| 18 | + | |
| 19 | +\subsection{Does AI disclosure earn risk-adjusted alpha unconditionally? (H1)} | |
| 20 | +Table~\ref{tab:alpha} reports CAPM and FF6 alphas of the long--short portfolios. The AI-opportunity | |
| 21 | +composite earns a raw spread of about $+2.3\%$ per year, of which the FF6 alpha is $+1.9\%$---but | |
| 22 | +statistically insignificant \tstat{1.24}. The AI-adoption and AI-infrastructure long--shorts are | |
| 23 | +similarly insignificant after risk adjustment. The one exception is the AI-disruption-risk spread, | |
| 24 | +whose FF6 alpha of $+2.8\%$ per year is marginally significant \tstat{2.10}, hinting at a small risk | |
| 25 | +premium for firms that flag AI as a competitive threat. The factor loadings (not the focus here) show | |
| 26 | +the AI long--short is roughly market-neutral with modest negative profitability (RMW) and investment | |
| 27 | +(CMA) tilts, consistent with a growth-oriented long leg. The verdict on H1 is clear: | |
| 28 | +\textbf{unconditionally, AI disclosure is at best weakly priced.} This is not the end of the story but | |
| 29 | +the beginning of it. | |
| 30 | + | |
| 31 | +\input{tables/tab_alpha} | |
| 32 | + | |
| 33 | +\subsection{Panel and Fama--MacBeth estimates} | |
| 34 | +Table~\ref{tab:panel} juxtaposes the two-way fixed-effects panel with the Fama--MacBeth estimator. The | |
| 35 | +contrast is instructive. In the Fama--MacBeth (cross-sectional) regressions, the AI-adoption and | |
| 36 | +AI-infrastructure premia are positive---$+1.3$ and $+1.6$ percentage points per standard | |
| 37 | +deviation---with \textit{t}-statistics near 1.6--1.7, indicating a weak but positive cross-sectional | |
| 38 | +premium on average. In the two-way fixed-effects panel, however, every AI coefficient collapses to | |
| 39 | +essentially zero. Because firm fixed effects remove all permanent cross-firm differences, this tells | |
| 40 | +us the signal lives \emph{across} firms, not \emph{within} them: a given firm writing relatively more | |
| 41 | +about AI from one year to the next does not predict its own subsequent return (anticipating H4). | |
| 42 | +Throughout, size carries the familiar negative premium ($t\approx-8$) and volatility a positive one, | |
| 43 | +consistent with the broader cross-sectional literature in this large-cap universe. | |
| 44 | + | |
| 45 | +\input{tables/tab_panel} | |
| 46 | + | |
| 47 | +\subsection{The structural break: AI pricing switched on after ChatGPT (H2)} | |
| 48 | +The full-sample averages mask a sharp regime change that is the paper's central result. Splitting the | |
| 49 | +sample at the November 2022 ChatGPT launch, the center and right panels of Figure~\ref{fig:quint} | |
| 50 | +reveal a striking transformation: the quintile pattern is nearly flat before 2022 and steeply | |
| 51 | +increasing afterward. The high-minus-low composite spread is $+2.4$ percentage points per year | |
| 52 | +pre-ChatGPT but $+14.6$ points per year post-ChatGPT---a more than sixfold increase. | |
| 53 | + | |
| 54 | +\begin{figure}[htbp]\centering | |
| 55 | +\includegraphics[width=\textwidth]{fig1_quintile_returns.png} | |
| 56 | +\caption{Mean forward twelve-month return by AI-disclosure composite quintile, full sample and by | |
| 57 | +sub-period. The high-minus-low spread is $+2.4$ percentage points before ChatGPT and $+14.6$ points | |
| 58 | +after.}\label{fig:quint} | |
| 59 | +\end{figure} | |
| 60 | + | |
| 61 | +Table~\ref{tab:break} quantifies the break two ways. In sub-period sorts, the AI-adoption Q5$-$Q1 | |
| 62 | +spread rises from $+2.2\%$ per year \tstat{2.04} pre-2022 to $+14.3\%$ \tstat{2.15} post-2022; the | |
| 63 | +composite rises from $+2.5\%$ to $+14.6\%$; AI infrastructure from $+1.4\%$ to $+13.6\%$. In the | |
| 64 | +pooled interaction regressions, the post-2022 incremental slope is positive for all three signals and | |
| 65 | +statistically significant for AI infrastructure \tstat{2.63}---the facet most directly tied to the | |
| 66 | +chip, cloud, data-center, and power firms that led the 2023--2025 rally. Figure~\ref{fig:spread} shows | |
| 67 | +the annual spreads: small and mixed-sign through 2021, uniformly large and positive for every | |
| 68 | +post-2022 cohort. | |
| 69 | + | |
| 70 | +\input{tables/tab_break} | |
| 71 | + | |
| 72 | +\begin{figure}[htbp]\centering | |
| 73 | +\includegraphics[width=0.9\textwidth]{fig3_annual_spread.png} | |
| 74 | +\caption{Annual high-minus-low (Q5$-$Q1) forward-return spread on the AI-disclosure composite, by | |
| 75 | +10-K fiscal year. Post-ChatGPT cohorts (red) are uniformly and substantially positive.} | |
| 76 | +\label{fig:spread} | |
| 77 | +\end{figure} | |
| 78 | + | |
| 79 | +The same regime change is visible in two further lenses. Figure~\ref{fig:cum} plots the cumulative | |
| 80 | +value of one dollar invested in the equal-weighted, annually rebalanced, self-financing | |
| 81 | +high-minus-low portfolio: it drifts sideways-to-up for a decade and then inflects upward after the | |
| 82 | +dashed ChatGPT line. Figure~\ref{fig:fmyear} plots the year-by-year Fama--MacBeth slope on the AI | |
| 83 | +composite (with controls): it hovers near zero for the entire 2010s and then turns sharply positive, | |
| 84 | +peaking in the 2024 cohort. The latter figure also delivers an important nuance: the size-controlled | |
| 85 | +premium is largest in the most recent cohort, consistent with the AI \emph{infrastructure} | |
| 86 | +super-cycle of 2024--2025 (the build-out of data centers and accelerated compute). We return to this | |
| 87 | +concentration when discussing limitations. | |
| 88 | + | |
| 89 | +\begin{figure}[htbp]\centering | |
| 90 | +\includegraphics[width=0.86\textwidth]{fig2_cumulative_ls.png} | |
| 91 | +\caption{Cumulative value of \$1 invested in the equal-weighted, annually rebalanced, self-financing | |
| 92 | +high-minus-low AI-disclosure portfolio (AI opportunity composite and AI disruption-risk).} | |
| 93 | +\label{fig:cum} | |
| 94 | +\end{figure} | |
| 95 | + | |
| 96 | +\begin{figure}[htbp]\centering | |
| 97 | +\includegraphics[width=0.9\textwidth]{fig6_fm_byyear.png} | |
| 98 | +\caption{Year-by-year Fama--MacBeth slope on the AI-disclosure composite (forward return per | |
| 99 | +cross-sectional standard deviation), controlling for size, momentum, and volatility. Bars are $\pm1$ | |
| 100 | +standard error.}\label{fig:fmyear} | |
| 101 | +\end{figure} | |
| 102 | + | |
| 103 | +Finally, Figure~\ref{fig:bin} confirms the pattern is not an artifact of a few influential | |
| 104 | +observations: the binned relation between the AI composite and forward returns is essentially flat in | |
| 105 | +the pre-ChatGPT sub-period and distinctly upward-sloping afterward, across the entire distribution of | |
| 106 | +AI disclosure rather than only at the extreme quintiles. | |
| 107 | + | |
| 108 | +\begin{figure}[htbp]\centering | |
| 109 | +\includegraphics[width=\textwidth]{fig5_binscatter.png} | |
| 110 | +\caption{Binned scatter of forward twelve-month return against the AI-disclosure composite, by | |
| 111 | +sub-period. Each point is a portfolio of firms in a bin of the AI signal; the line is an OLS fit. The | |
| 112 | +conditional slope steepens markedly after ChatGPT.}\label{fig:bin} | |
| 113 | +\end{figure} | |
| 114 | + | |
| 115 | +\subsection{The anatomy of the premium: size and sector} | |
| 116 | +Where in the cross-section does the post-2022 premium concentrate? Table~\ref{tab:doublesort} and | |
| 117 | +Figure~\ref{fig:double} report an AI~$\times$~size double sort. Before 2022 the AI gradient is flat | |
| 118 | +within both size halves. After 2022 it is steep, and dramatically so among smaller firms: small, | |
| 119 | +high-AI firms earned a mean forward return of 34.6\%, versus 19.5\% for small, low-AI firms---a | |
| 120 | +15-point gap---while the corresponding gap among large firms is 7 points. The premium is thus | |
| 121 | +\emph{not} merely a mega-cap phenomenon (a point we reinforce in Section~\ref{sec:robustness}); if | |
| 122 | +anything it is strongest among the smaller, less-followed names, consistent with an attention-based | |
| 123 | +mechanism in which information diffuses more slowly into smaller stocks. | |
| 124 | + | |
| 125 | +\input{tables/tab_doublesort} | |
| 126 | + | |
| 127 | +\begin{figure}[htbp]\centering | |
| 128 | +\includegraphics[width=\textwidth]{fig9_double_sort.png} | |
| 129 | +\caption{AI-disclosure $\times$ firm-size double sort: mean forward twelve-month return by AI tercile | |
| 130 | +within small and large firms, pre- and post-ChatGPT.}\label{fig:double} | |
| 131 | +\end{figure} | |
| 132 | + | |
| 133 | +\subsection{Economic significance} | |
| 134 | +The statistical break is matched by an economic one. The Sharpe ratio of the equal-weighted | |
| 135 | +AI-composite long--short portfolio---a direct gauge of risk-adjusted attractiveness---rises from 0.15 | |
| 136 | +in the pre-ChatGPT decade to 1.33 afterward; for the AI-disruption-risk spread it rises from 0.33 to | |
| 137 | +1.15. A Sharpe ratio above one is exceptional for a single-characteristic, self-financing equity | |
| 138 | +strategy, and its emergence precisely at the ChatGPT boundary is hard to reconcile with a constant | |
| 139 | +risk premium. The point estimates in the quintile sorts are equally vivid: a 14-point annual spread | |
| 140 | +between the top and bottom AI quintiles is roughly three times the unconditional equity risk premium | |
| 141 | +and an order of magnitude larger than the pre-2022 spread. Even acknowledging that a portion of this | |
| 142 | +reflects the higher realized volatility of AI-exposed firms (documented in Section~\ref{sec:robustness}) | |
| 143 | +and the broad technology rally, the magnitude of the post-2022 re-rating is among the largest | |
| 144 | +single-theme cross-sectional effects in the recent asset-pricing record. | |
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