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Software “detects CEO emotions, predicts financial performance”

blogs.wsj.com

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Re: Software “detects CEO emotions, predicts financial performance”

#11

Post by 6stringmerc »

Nice correlation study, but I'm really skeptical of any causation inference that might be possible. I mean, if the software gets to the point where it can identify the next Jeff Skilling[1] then great, but I doubt such surface level data has a lot of predictive potential.

I do find it kind of funny that the article cites the study mentioning 'negative' type emotional states aligned with ~9% profit boost, when one of the most interesting 'tells' in the Enron case was when Jeff Skilling got really bitchy at an analyst who was probing him hard on some difficult questions. The disgust was holding up a facade in that instance, and I don't doubt dishonesty might be a factor in the emotional state of others.

>“Fear is widely recognized as a powerful motivator. Thus it is not surprising to find that a CEO who appears fearful under interrogation is perceived by the market as a CEO who will work harder to increase firm value,” said the paper, which was co-authored by Steve Ferris of the University of Central Missouri and Ali Akansu and Yanjia Sun of New Jersey Institute of Technology.

This is a quite optimistic view of what one's behaviors might result in when driven by fear. I'm fairly confident fear of failure drives a lot of fraud. It sure seems a familiar story...

[1]https://en.wikipedia.org/wiki/Jeffrey_Skilling

Re: Software “detects CEO emotions, predicts financial performance”

#12

Post by bitwize »

paulmd wrote: post #3
plasticxme wrote: post #2

I envision a future where CEOs don Guy Fawkes masks before doing press releases.

And damage their branding? Nah, they'll do motion capture and render their mascots doing it. Picture Ruby giving AMD's presser.

I'm imagining characters from that CG house of horrors Foodfight! appearing on behalf of their respective companies.

Re: Software “detects CEO emotions, predicts financial performance”

#16

Post by solipsism »

6stringmerc wrote: post #11

Nice correlation study, but I'm really skeptical of any causation inference that might be possible. I mean, if the software gets to the point where it can identify the next Jeff Skilling[1] then great, but I doubt such surface level data has a lot of predictive potential. I do find it kind of funny that the article cites the study mentioning 'negative' type emotional states aligned with ~9% profit boost, when one of…

It doesn't seem to me that whether there can be shown to be a causal relationship between this data and future performance would have any bearing on whether the relationship has predictive power.

Re: Software “detects CEO emotions, predicts financial performance”

#17

Post by dpflan »

I think picking up a micro-facial movements and body posture is where this software analysis can shine, the minute details that can indicate emotions.

Adding sentiment analysis, not just CEO facial analysis, is an interesting tool that can be used by traders / investors.

This is a short paper, may be interesting: Trading Strategies to Exploit Blog and News Sentiment - http://www3.cs.stonybrook.edu/~skiena/lydia/blogtrading.pdf

Also, Scutify, a financial social network, has a sentiment analysis of its members. - https://www.scutify.com/sentiment-rankings.html

Re: Software “detects CEO emotions, predicts financial performance”

#18

Post by jleader »

The fact that the article presents different metrics in response to different inputs (CEO expressions of disgust correlated with 9.3% boost in overall profits over the following quarter, CEO expressions of fear correlated with 0.4% rise in stock price the following week) makes me strongly suspect excessive data-mining.

I haven't been able to find the actual paper in question; it looks like this is the abstract: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2533615. The lead author's page (https://web.njit.edu/~akansu/journal.htm) lists it as "Journal of Behavioral Finance, to appear, 2017."

Re: Software “detects CEO emotions, predicts financial performance”

#20

Post by harryjo »

chollida1 wrote: post #5

:) I have to admit I haven't heard of a fund started to use this idea but I guess it was just a matter of time. There are always funds you hear about that are created based on some previously unexplored data signal like this, twitter sentiment is an example that was popular circa 2011. The problem that most of these signals has is that its really not a predictor on its own and it becomes just one of the 100's of sign…

Whenever someone claims a one-dimensional measure of "accuracy", you can know they are lying. They cherry-pick one detail in their pipeline, not report the overall lift in performance vs other known methods of predicting the important variable.
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