Investors Are Using AI Analysis to Tell When CEOs Are Lying
According to a recent report, investors are beginning to harness AI and natural language processing (NLP) to analyze the voices of corporate CEOs and management teams to determine whether they’re being truthful or not.
Reuters reports that investors are beginning to utilize artificial intelligence to learn and analyze the language patterns of company managers and CEOs in order to determine if they’re being truthful. This technique has already been used by investors as an additional data point when making investment decisions.
Evan Schnidman, a language pattern software specialist, says that in late 2020 executives in the tech industry claimed that fears of a semiconductor chip shortage were unfounded. But according to algorithmic analysis of their voices, the executives displayed signs of uncertainty. Schnidman, who acted as a consultant to the two fintech companies behind the analysis, commented: “We found that IT sector executives’ tone was inconsistent with the positive textual sentiment of their remarks.”
Not long after executives assured investors that no chip shortage was imminent, companies worldwide began warning of a severe shortage of chips being produced and share prices in auto and industrial firms fell.
Investors are beginning to see the Natural Language Processing (NLP) technology as a cutting-edge tool to get an advantage over their rivals. Reuters interviewed 11 fund managers, all of which stated that they are trialing similar systems. The funds stated that traditional financial data and corporate statements are so heavily mined that they offer little value.
Reuters spoke to Slavi Marinov, the head of machine learning at Man AHL, which is part of the $135 billion investment management firm Man Group. Marino stated that NLP was “one of the major research areas of focus,” at the fund. “These models transform something that is very messy to something that is easily understandable by a quant,” he said.
Read more about the use of AI to analyze voices at Reuters here.