Taking Stock of Intonation

Hey friends of PondelWilkinson, let’s keep this one to ourselves: Voice analysis may become the next tool, and a good one, for predicting stock prices. Two professors from Duke think they have proved it.
 
They learned that if you listen very carefully to subtle emotional cues in a CEO’s or CFO’s voice on a conference call, you may be able to forecast, not an EPS estimate, but a company’s future stock performance.
 
Using a digital voice emotion software program made by privately held Israeli company Nemesysco Ltd., Profs William Mayew and Mohan Venkatachalam (yes, I checked the spelling twice) analyzed voice inflections from 1,647 typical quarterly conference calls hosted by 671 public companies.
 
The study monitored subtle and not so subtle vocal cues that showed either positive or negative emotional states.  They then checked the companies’ performances to learn whether earnings, stock prices or analysts’ recommendations corresponded with the cues over the next six months.
 
Voila!  When the execs were excited, the stocks responded favorably and earnings were on the rise. But the more negative the intonations, the lower the stock prices went. According to the study, which was published in the Journal of Finance, performance was most pronounced in either direction when there were questions posed on calls, making it easier for the software program to detect the cues.
 
Where can you buy the software package and how much does it cost? Sorry, you’ll have to research that for yourself.  If it’s not too expensive, please let me know.
 
I guess we just have to hope that the executives on those conference calls really are feeling what they are saying, lest we must heed the words of American poet William Carlos Williams, who wrote: “It’s not what you say that matters, but the manner in which you say it.”

— Roger Pondel, rpondel@pondel.com