Mood, music and money: what our Spotify playlists reveal about the emotional nature of financial markets

Our paper finds a new measure of the mood of a nation in a particular point in time which is continuous, and more importantly, language free. Founded in the music psychology literature, this measure is based on the positivity of the music that individuals choose to listen in Spotify (emotion congruency or in lay words, people listen to sad/happy music when they are sad/happy). With this new tool at hand, we find that the mood of a nation affects the individuals' investment decisions and ultimately, the stock markets. However, this effect disappears quickly. So, the bottom line is investors should think twice before taking investment decisions influenced by their mood.

This overview is based on the paper entitled “Music Sentiment and Stock Returns Around the World” authored by Alex Edmans, Adrian Fernandez-Perez, Alexandre Garel and Ivan Indriawan, and is published in the Journal of Financial Economics and featured in The Conversation