New research shows that when the language used by financial analysts and reporters become increasingly similar the stock market may be overheated.
Scientists have found that the trends in the use of words by financial journalists correlate closely with changes in the leading stock exchanges around the world.
Computer scientists who examined over 18,000 online articles from the Financial Times, the New York Times and the BBC found that the verbs and nouns used converge in a 'herd-line' fashion in the lead up to a stock market bubble. When the bubble bursts, the language disperses.
Professor Mark Keane, Chair of Computer Science in UCD, was involved in the research, which will be presented at the International Joint Conference on Artificial Intelligence in Barcelona tomorrow.
He said that by plotting the distributions of words used in financial articles published online between 2006 and 2010 into a computer model, the scientists were able to identity what they called 'verb convergence' and 'noun convergence'.
'Our study shows that reporters converge on the same language as their commentaries become more uniformly positive in the lead up to the crash,' he said.
