‘Herd-Like’ Financial Reporting Could Predict Stock Market Bubbles

NasdaqVia ScienceDaily:

When the language used by financial analysts and reporters becomes increasingly similar the stock market may be overheated, say scientists.

After examining 18,000 online articles published by the Financial Times, The New York Times, and the BBC, computer scientists have discovered that the verbs and nouns used by financial commentators converge in a ‘herd-like’ fashion in the lead up to a stock market bubble. Immediately afterwards, the language disperses.

The findings presented at the International Joint Conference on Artificial Intelligence, Barcelona, Spain, on July 19, 2011, show that the trends in the use of words by financial journalists correlate closely with changes in the leading stock indices.

“Our analysis shows that trends in the use of words by financial journalists correlate closely with changes in the leading stock indices — the DJI, the NIKKEI-225, and FTSE-100,” says Professor Mark Keane, Chair of Computer Science in University College Dublin, who was involved in the research.

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10 Comments on "‘Herd-Like’ Financial Reporting Could Predict Stock Market Bubbles"

  1. Hadrian999 | Jul 23, 2011 at 8:44 pm |

    bubbles usually are predicted, the problem is very few people listen to the predictions

  2. Hadrian999 | Jul 23, 2011 at 4:44 pm |

    bubbles usually are predicted, the problem is very few people listen to the predictions

    • Anarchy Pony | Jul 23, 2011 at 8:04 pm |

      True enough. It’s also hard to tell when they’ll burst.

      • Especially since the entire herd is usually busy blowing each other and giving each other butt pats regarding their fiscal brilliance.

        • Hadrian999 | Jul 24, 2011 at 1:51 pm |

          I remember a financial news program I was watching, I think it was on fox news. they had a guest predicting the housing bubble bursting and the hosts were basically calling him a moron because “everyone knows  real estate never looses value.

        • Anarchy Pony | Jul 24, 2011 at 5:56 pm |

          Yeah, pretty much. Talk about a bunch of insulated morons with their heads in the clouds. 

  3. Anarchy Wolf | Jul 24, 2011 at 12:04 am |

    True enough. It’s also hard to tell when they’ll burst.

  4. Especially since the entire herd is usually busy blowing each other and giving each other butt pats regarding their fiscal brilliance.

  5. Hadrian999 | Jul 24, 2011 at 5:51 pm |

    I remember a financial news program I was watching, I think it was on fox news. they had a guest predicting the housing bubble bursting and the hosts were basically calling him a moron because “everyone knows  real estate never looses value.

  6. Anarchy Wolf | Jul 24, 2011 at 9:56 pm |

    Yeah, pretty much. Talk about a bunch of insulated morons with their heads in the clouds. 

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