Risk ranking from financial reports

Abstract

This paper attempts to use soft information in finance to rank the risk levels of a set of companies. Specifically, we deal with a ranking problem with a collection of financial reports, in which each report is associated with a company. By using text information in the reports, which is so-called the soft information, we apply learning-to-rank techniques to rank a set of companies to keep them in line with their relative risk levels. In our experiments, a collection of financial reports, which are annually published by publicly-traded companies, is employed to evaluate our ranking approach; moreover, a regression-based approach is also carried out for comparison. The experimental results show that our ranking approach not only significantly outperforms the regression-based one, but identifies some interesting relations between financial terms. © 2013 Springer-Verlag.