Sep

4

bernankePerhaps related to the horse whispering discussion and a tell of potential value until bosses are more heavily trained what words to never say. The expert facial readers might harder to fool.

From the Irish Times:

Further research is likely to prove fruitful, the researchers conclude. Vocal cues provided by Federal Reserve chairman Ben Bernanke might assist in forecasting interest rates, they say, while exploration of executives' facial expressions should also yield results.

Such techniques are already being employed by Business Intelligence Advisers, a Boston firm staffed by a number of ex-CIA operatives that conducts behavioural analyses of top executives.

Over the last decade, it claims to have analysed more than 50,000 question-and-answer exchanges, more than 4,000 earnings calls, across more than 1,500 companies in 30-plus countries, using its "tactical behaviour assessment model". Their clients reportedly include Goldman Sachs and some of the world's top hedge funds.

and the related recent study:

Abstract:

We estimate classification models of deceptive discussions during quarterly earnings conference calls. Using data on subsequent financial restatements (and a set of criteria to identify especially serious accounting problems), we label the Question and Answer section of each call as "truthful" or "deceptive". Our models are developed with the word categories that have been shown by previous psychological and linguistic research to be related to deception. Using conservative statistical tests, we find that the out-of-sample performance of the models that are based on CEO or CFO narratives is significantly better than random by 4%- 6% (with 50% - 65% accuracy) and provides a significant improvement to a model based on discretionary accruals and traditional controls. We find that answers of deceptive executives have more references to general knowledge, fewer non-extreme positive emotions, and fewer references to shareholders value and value creation. In addition, deceptive CEOs use significantly fewer self-references, more third person plural and impersonal pronouns, more extreme positive emotions, fewer extreme negative emotions, and fewer certainty and hesitation words.


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