2-6. Basic NLP Analysis

Congratulations on finishing this lesson. Now you know how to use bag-of-words to analyze documents to see how similar they are and see if a company is doing well or not. Now, you will apply everything you learned in this lesson to the project to actually do this for a real 10-K. Good luck in … Read more

So far, we have considered metrics that are focused on individual documents. Given that financial documents are released periodically, it will be useful to quantify changes of these documents over time. We could simply track the readability index or negative sentiments over time. But this metrics tend to capture one specific feature of a document. … Read more

So, far we’ve talked about the simple counting of words. In any language certain words tend to be more common than others, so naturally it would be useful to reduce the importance of frequent words in our bag of words. This can be done through the re-weighing method called term frequency inverse document frequency. The … Read more

Now that we’ve learned how to harvest our bag of words, what can we do with it? As a simple next step, we could categorize our bags. Not all apples are created equal. Some may be good and some may be bad. For instance, words like loss, bankruptcy, and damage are likely to indicate negative … Read more

When analyzing a financial document, we can gain deeper insights looking at the word compositions. For instance, a document filled with words like lawsuits, risks, losses, bankruptcy, might be indicative of problems within the company. How do we quantify this information? This can be done by condensing a document into a bag of words. Reviewing … Read more

I remember my first time reading a 10k. My immediate impression was “wow”, this document is long and complicated. These extra complication exists because companies are required by law to disclose potential risks and problems in detail so that down the road, they won’t be liable for deceptive reporting. The level of complexity of the … Read more

In this lesson, we will learn different ways of converting text in financial statements into quantitative data so that they may be used as input for developing trading strategies. We will mainly focus on three frequently used metrics for financial analysis. The first one, readability. How easy is the text for reading. The second, sentiments. … Read more