Introducing the Series Paper 1 about Q&A Language Transparency

Earnings Calls Communication Quality

We find that firms exhibiting lower-quality interactions between management and analysts during Earnings Calls, measured by reduced readability scores for both groups, consistently underperform their peers.

Q&A Linguistic Transparency Gap

Firms whose management provided harder-to-read responses relative to clearer analyst questions systematically exhibited weaker subsequent stock performance.

RavenPack's Q&A Linguistic Transparency Gap measures the relative disclosure opacity, defined as the difference in readability between management's answers and the preceding analyst questions.

A long-short, dollar-neutral factor-mimicking strategy based on the Q&A Linguistic Transparency Gap has generated since 2015 an average return spread of 440 basis points over a weekly effective holding period within the U.S. mid- and large-cap universe.

Firms that communicate relatively more clearly tend to be high-quality growth companies, with more disciplined capital expenditure and asset growth.

Strategy Performance

Portfolio statistics are based on returns in excess to the US mid-large cap market. The Effective Holding Period is the number of days required to completely rebalance the portfolios.

Features	Annualized Excess Returns	Information Ratio	Avg. Effective Holding Period
Q&A Transparency Gap	440bps	0.66	4 days
Management Answer Transparency	330bps	0.48	4 days
Analyst Question Transparency	330bps	0.47	3 days

The signals are robust across quantile sorts, full cross-sections, and multiple time decays.

Cumulative Performance

Data and implementation

This research uses RavenPack Transcript Annotations, offering a deep level of granularity, and providing detailed metadata at the sentence level. Annotated sections and text blocks are fetched from the Q&A sections in Earnings Calls Transcripts, then consolidated with document-level analytics.

Why it matters

By measuring the linguistic gap between what analysts ask and how management responds, quants can uncover hidden signals in corporate communication.

In short: clear questions paired with opaque answers may signal underperformance, while transparency often points to high-quality, well-managed firms.