What our Spotify playlists reveal about the emotional nature of financial markets
We like to think our purchase decisions are based on rational calculations and facts, but we know they are often driven by emotions, too. When we splurge on nice food, clothes or electronic gadgets, are we really thinking in terms of cost and benefit, or are we responding to stress, frustration, happiness or excitement?
The same can be asked of financial markets. The famous “efficient markets hypothesis” argues that stock prices are driven by rational calculations. But traders are human and humans are affected by emotions. Do these emotions feed through to the stock market?
Studying this question is difficult because people’s emotions aren’t observable. While emotions do manifest in observable actions, many such actions (aggressive behaviour or language, for example) are not captured by any data.
But what if there was a way to measure the overall mood of a country…