Jan 27, 2022 - Economy

Happy music, happy markets

Illustration of the bull statute listening to music

Illustration: Aïda Amer/Axios

Recent research finds that when a country is listening to happier songs, markets perform better.

Why it matters: There's an academic divide between economists who argue markets are rational and efficient, and those who say emotion plays a role. This paper puts a notch on the board for Team Feelings.

  • It's not easy to objectively study mood. Proxies like weather have been used in the past. One of the study's coauthors, Alex Edmans, published a 2007 paper connecting World Cup results to stock market returns.
  • For this paper, researchers looked at data from Spotify, which scores songs for positivity.

State of play: Markets move with moods, Adrian Fernandez-Perez, a senior research fellow at Auckland University of Technology, tells Axios.

  • "The key takeaway is be careful with your feelings when you take positions in the market."

Correlation isn't causation, but the researchers say there's more to their methods. They tested their results in a few ways to see if it was the market that actually was affecting moods instead of the other way round. Nope.

Bonus: The happiest song on Spotify is "September" by Earth, Wind & Fire, one of the study's coauthors told the Harvard Business Review.

Go deeper