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Spotify should open a hedge fund

Everyone knows that the music we hearken to influences our temper. If we hearken to upbeat music (e.g. this track) we are inclined to really feel higher and are extra optimistic in regards to the world and our life. If we hearken to miserable or unhappy songs (e.g. this one) we really feel extra depressed and pessimistic.

Chances are you’ll not know this, however Spotify has skilled an AI based mostly on the enter of music consultants and most of the people on virtually all songs in its database. For every track, there’s a valence rating that describes how upbeat it’s. The dimensions ranges from for depressive songs that make you need to kill your self to for songs which can be like being excessive on unlawful medication for the primary time (not that I’ve any expertise with that).

In what can solely be a case of lockdown fever, a gaggle of researchers from New Zealand has examined the common valence of the highest 200 songs performed on Spotify within the US day-after-day in 2017, 2018, and 2019. 

Right here is the outcome:

Common every day valence of high 200 songs on Spotify

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Source: Fernandez-Perez et al. (2020).

There are common spikes in temper round Christmas and smaller spikes round Easter and different public holidays. After which there’s a huge wave of melancholy in summer time 2018 with a big unfavorable spike in July 2018. I’m not positive, however I feel this was the day the German soccer group was eradicated within the group stage of the World Cup. A tragic day, if there ever was one.

What the researchers did now was to analyze how this valence measure correlates with inventory market returns. And similar to earlier analysis on the climate has proven that on sunny days, individuals are extra optimistic and thus extra prepared to purchase shares, so too does the temper of music affect our funding choices. On days with a constructive valence, inventory markets are inclined to go up greater than justified by fundamentals, resulting in a short-term reversal within the subsequent two days. In different phrases, Spotify may run a hedge fund that measures the valence of the tunes performed every day after which wager on short-term reversals or the subsequent few days. It’s a disgrace that these results are so small that it’s seemingly inconceivable to generate profits with it. However at the very least we loved the music…

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