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Prof. Amy Yunzhi ZANG
Associate Professor
Department of Accounting
The Hong Kong University of Science and Technology

We study a less-understood distinction between hard information and soft information, namely their differing ability to convey vagueness. Theories in philosophy and linguistics suggest that language is inherently vague, which can be valuable when quantification is not feasible or desirable. Accordingly, we argue that the value of vagueness plays an important role in analysts’ choice of communication format in their reports. Empirically, we find that in their reports, analysts include useful information in vague linguistic expressions but not numerical forecasts. Specifically, the textual tone of analyst reports has predictive power for forecast errors and subsequent revisions in numerical forecasts, and this relation becomes stronger when analysts’ language is vaguer, when uncertainty is higher, and when analysts are busier. Overall, our evidence is consistent with the theory that vagueness in language is valuable.