Investors Begin Using AI to Detect CEOs' Emotional States
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Investors and asset managers are harnessing the power of artificial intelligence to gain insights into the underlying emotional states of company CEOs by analyzing their speeches. This trend is becoming an emerging indicator in the investment community, sparking discussions about the application of AI in executive analysis.
Image source note: The image is AI-generated, with image rights licensed to service provider Midjourney
Companies like Speech Craft Analytics are developing AI algorithms that utilize natural language processing to detect various aspects of speech, including speaking rate, pitch, volume, as well as subtle tremors and pauses such as 'um' and 'ah' that are typically imperceptible to the human ear. Mike Chen, Chief Researcher at Robeco, stated: 'The idea is that audio captures more than just the content in the text. Even if you have a sophisticated semantic machine, it can only capture semantics.'
This analysis is expected to provide investors with more accurate insights into executives' true sentiments and intentions, thereby predicting potential future actions. However, this trend has yielded some interesting results. Corporate management has become aware that investors are using AI to understand their inner thoughts, leading to a trend of increasingly positive public information. Yin Luo, Head of Quantitative Research at Wolfe Research, noted: 'We've discovered tremendous value in text analysis. The problem this creates for us and many others is that overall sentiment is becoming increasingly positive...because corporate management knows their words are being analyzed.'
However, the technology developed by companies like Robeco has some weaknesses. When a company appoints a new CEO, the technology encounters issues in comparing the emotional states of executives. Additionally, biases introduced by developers pose a potential problem. Executives may choose to maintain a positive attitude by adjusting their voice and demeanor, but this requires a specific skill set that not every CEO possesses.
Investors have shown strong interest in the application of AI for analyzing CEO emotional states, despite the existing challenges and limitations of this technology.