Socrates drew his strength from knowing what he didn’t know, but it seems corporate executives get punished by investors when they admit to not knowing something. Three researchers from the University of Frankfurt created a machine learning programme that analysed earnings calls of S&P 500 companies for evasive answers by executives. They looked at the phrases these executives used and identified non-answers to questions by analysts. The word cloud below shows which phrases most reliably indicate a non-answer.
Hmm so if a CEO acts like they are wise, like socrates, the analysts spank the share price?? And if the CEO admits to no limits on their wisdom, the share price soars?? V odd.
Suggests that analysts are a bunch of amateurs, and that their Buy recommendations can be treated as a signal to sell (and vv)...
Well, it is very odd, I agree with you because to me admitting to not knowing something is a sign of competence. But working on the sell side for a while now, I can tell you that the sophistication of the average sell side analyst is not as high as I would like it to be...
Reminds me of a talk I saw with Carson Block who said he carefully analyses evasive answers on earnings calls to identify potential shorting opportunities.
Hmm so if a CEO acts like they are wise, like socrates, the analysts spank the share price?? And if the CEO admits to no limits on their wisdom, the share price soars?? V odd.
Suggests that analysts are a bunch of amateurs, and that their Buy recommendations can be treated as a signal to sell (and vv)...
Well, it is very odd, I agree with you because to me admitting to not knowing something is a sign of competence. But working on the sell side for a while now, I can tell you that the sophistication of the average sell side analyst is not as high as I would like it to be...
Nice research.
Reminds me of a talk I saw with Carson Block who said he carefully analyses evasive answers on earnings calls to identify potential shorting opportunities.
That is true and I have a post coming up on that topic later this summer...