Earnings Calls Unveiled: From CEO Tightropes to AI Antics


Sep 18, 2023


Sarah Parsons Wolter


Sep 18, 2023


Sarah Parsons Wolter


Earnings calls: that quarterly fiesta where CEOs ride a rollercoaster of ego boosts and heart palpitations. On these calls, CEOs might bask in the glow of an analyst's praise or engage in the delicate dance of divulging details without revealing too much. A recent study, “Executives vs. Chatbots,” highlights the razor's edge between "telling it all" and "giving just a hint." This study introduces the innovative concept of "Human-AI Differences (HAID)", illuminating how CEO-driven revelations can either bolster or batter stock liquidity and shape analysts' predictions.

Matt Levine's dissection of the study provides more insight. He identifies two distinct types of earnings calls. First, there’s the "vanilla" type, akin to a chat with ChatGPT— predictable and consistent, yet missing that "oomph." Then, there's the wildcard, akin to Ben & Jerry’s (should it even exist) “Oat of This Swirled” flavor: responses from executives that are unpredictable and surprising. The intriguing part? When CEOs said things chatbots wouldn’t predict, stocks showed more fluctuation post-call, and analysts' subsequent forecasts hit the mark more often. However, CEOs, being the ever-cautious cooks in this financial kitchen, might not always be in the mood for such spicy outcomes. This poses a question: are CEOs inadvertently becoming the ringmasters of LLM training in the stock market circus, juggling information to keep performance tame?

In our digital age, where algorithms could very well outnumber human ears on earnings calls, the choice of words transcends style—it's a matter of corporate survival. Perhaps the lesson for companies is this: if earnings take a downturn, let ChatGPT handle your call, but if they soar, take the mic yourself. Yet, the age-old question remains: can algorithms genuinely lead the stock market dance, or will the timeless rhythm of human intuition always steal the show?

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From CEO Tightropes to AI Antics

ChatGPT should do your earnings calls - The theory behind regular earnings calls with analysts or “investor days” is that senior executives can better inform the investment world about their fascinating company and its vibrant prospects — going deeper than what they can glean from the numbers and other public information, etc. They’re an integral part of the theater of being a public company. But in practice you don’t really want to give away anything too revealing either, whether good or bad. Read more

Executives vs. chatbots: unmasking insights through human-AI differences in earnings conference Q&A - This study introduces a novel measure of information content (Human-AI Differences, HAID) by exploiting the discrepancy between answers to questions at earnings calls provided by corporate executives and those given by several context-preserving Large Language Models such as ChatGPT, Google Bard, and an open source LLM. Overall, the results highlight the importance of using LLM as a tool to help investors unveil the veiled – penetrating the information layers and unearthing hidden insights. Read more

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