Analyzing the Information Content of Sentiment in the Board's Activity Reports: Bag of Words Method

The purpose of this study is to analyze the information content of sentiment (tone) in the board's activity reports and compare explanatory power of different methods of measuring sentiment.

The sentiment was measured by general word list and domain-specific word list with equal weighting and wf-idf weighing method. The sample of this study consists of 512 firm-years from 2009 to 2018. Panel data method and Vuong test were used to test hypothesis.

The results show that the market reacts to the sentiment of board's activity reports in the short-window of announcement date anduse of domain-specific word list and the wf-idf weighting method for measuring the sentiment did not increase the explanatory power of the models used to analyze the information content of sentiment.

sentiment of board's activity reports have information content and use of different weighting methods does not change the results of the study. Contribution:Providing evidence about market reactions to the sentiment of board's activity reports, creating domain-specific word list to measure sentiment in Persian language, as well as comparing prevalent weighting methods, are the main contribution of this study.