Stumped by the Gobbledygook in Company Reports? So Are the Pros.

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Johnny Oxygen
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Stumped by the Gobbledygook in Company Reports? So Are the Pros.

http://www.cnbc.com/id/43268434

Researchers at the University of Michigan analyzed tens of thousands of 10-K reports filed by companies during a 12-year period to assess their level of readability.

"The less readable these documents are, the more pressure it creates from clients for analysts to provide commentary and forecasts," said Feng Li, an accounting professor who worked on the study.

In other words, when ordinary investors can't make heads or tails of a report, they lean on the professionals to explain what it means.

...More surprising, perhaps, is that the less readable a corporate report is, the more influence it appears to have on investors. Analyst forecasts based on 10-Ks in the highest, or least readable, Fog quartile have about 10 percent more influence on investors than those from the lowest, or most readable, quartile, as measured by stock movement on the day of the forecasts.

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