Note: a hat tip to a Villanova student for sending me the information that led to this blog post…
A recent study looked at the average happiness of the songs played over a week in a country and compared it with what happened in the country’s stock markets that week. They found that more-positive listening choices were significantly correlated with stock price gains. It’s a robust finding based on 500 billion streams of 58,000 songs.
The study was part of a broader look at what drives the market: fundamentals (e.g., interest rates, unemployment figures) or emotions. The efficient-markets hypothesis holds that stock returns should reflect only fundamentals. According to Alex Edmans of London Business School, one of the study’s co-authors, it’s the irrelevance of music that makes the study interesting. In a rational model, factors that don’t affect economic fundamentals—such as investor sentiment/mood—should have no impact on stock returns. This research is showing that they do.
If you’re curious as to how the researchers measured the happiness level of a song, they relied on a team at Spotify called the Echo Nest. This team, building on research started at MIT, consisted of human experts who scored about 5,000 songs and assigned a positivity score between 0 and 1. This data was then used to create a machine-learning algorithm that can be applied to every song. The algorithm doesn’t take into account lyrics but uses the sound, the beat, and so on.
The researchers measured a country’s mood by multiplying the rating for a song by the number of streams of that song and then added up all those multiplied values. They then divided that total by the total number of streams of all songs to arrive at a weighted average. As two examples, the United States averaged out at about 0.46—not too positive. Mexico was 0.63. Of course, these scores changed over time.
These scores were then compared to what happened in the stock market, and as noted above, more-positive listening choices were significantly correlated with stock price gains.
So that is why I ask you: next time you listen to music, whether it is on Spotify or Apple Music or YouTube, please listen to happy music. This will lead to gains in the stock market, which will help my retirement fund grow, which will enable me to retire sooner rather than later.
If you’re curious what the happiest song is, it turns out to be “September” by Earth, Wind & Fire, apparently. “Happy” by Pharrell Williams is up there too. The most negative song is “Legion Inoculant” by Tool. The Adele song “Hello” was also down there.
So I’ll get things started with the song September. Just play it, then share it, and before you know it, 800 million people will have listened to it, and the stock market will explode.
Your retirement account will thank you, and I will thank you…
Source: Harvard Business Review
*image from USA Today