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Evasive C-suite execs can now add AI to the list of those scrutinizing their earnings calls.<\/p>\n
A study<\/a> from researchers at Germany\u2019s University of M\u00fcnster and Washington University in St. Louis found that analysts can use large language models to infer when executives aren\u2019t being forthcoming on earnings calls, reported London-based investment strategist Joachim Klement<\/a>.<\/p>\n During the study, the researchers fed earnings call transcripts into OpenAI\u2019s GPT-4 Turbo to gauge whether an executive\u2019s comments were \u201cusual\u201d or \u201cunusual.\u201d When the AI identifies an unusual earnings call transcript, it will lay out its reasoning, Klement explains.<\/p>\n In one example, the AI analyzed the transcript and flagged that management was possibly avoiding specifics, despite being pressed by analysts, according to Klement. The AI flagged \u201cunusualness\u201d most often when speakers offered lengthy responses and long discussions about non-financial topics, some of the most common ways execs deflect negative news.<\/p>\n Since the launch of ChatGPT in 2022, the finance industry has increasingly incorporated AI into more of its day-to-day operations. Earlier this year JPMorgan Chase<\/a> unveiled<\/a> an AI tool to help interpret the ambiguous \u201cFedspeak\u201d spouted by Chairman Jerome Powell. Still, the results of AI making a significant difference in stock picking is yet unproven.<\/p>\n Ultimately, the researchers believe AI could help analysts predict the market, according to the researchers by getting a better handle on earnings call<\/p>\n \u201cThe stock market reacts negatively to unusual financial communication, with an elevated trading activity,\u201d the researchers wrote in the study\u2019s abstract. \u201cThis response is exacerbated when more dimensions of unusual communication are identified for a firm.\u201d<\/p>\n Klement points out that with the introduction of OpenAI\u2019s GPT-4o in May, analysts could also upload the earnings call audio to the LLM or deploy it during the livestream.<\/p>\n While analysts often pick up on unusual comments themselves, the technology will allow them to analyze multiple earnings calls at once across industries.<\/p>\n \u201cPersonally, I love it, but as a corporate executive I probably wouldn\u2019t because chatGPT makes it much harder to get away with deception and distraction,\u201d Klement wrote.<\/p>\n<\/div>\nRecommended Newsletter: <\/strong>CEO Daily provides key context for the news leaders need to know from across the world of business. Every weekday morning, more than 125,000 readers trust CEO Daily for insights about\u2013and from inside\u2013the C-suite. Subscribe Now<\/a>.<\/div>\n<\/div>\n