Subtle shifts in the writing style of mandatory SEC filings can predict a company's future stock returns even if the financial numbers haven't changed.
April 1, 2026
Original Paper
Disclosure Drift as a Predictive Signal for Equity Returns
SSRN · 6444659
The Takeaway
Researchers found that 'disclosure drift'—changes in the language, structure, and length of corporate filings—functions as a powerful market signal. High-drift companies significantly outperformed the market over a 30-year period, suggesting that how a company writes its reports is as important to investors as what is actually in them.
From the abstract
We document a new class of predictive signal for equity returns: disclosure drift. By measuring how the language, structure, and content of SEC filings change between consecutive reporting periods, we construct a composite score that captures material shifts in corporate disclosure behavior. Using a sample of 24,209 filings from 4,745 unique tickers spanning 1996 to 2026, we demonstrate that high-drift filings are followed by economically and statistically significant abnormal returns. Our signa