Spotify Wrapped is making the rounds at the end of this very *insert preferred adjective here* year. Everyone shares their top artists and songs of the year, and we rejoice in the gift that music gives us.

But, can music actually be a predictor of our moods? And if it can predict our moods, does it somehow reflect the stock market?

Do America’s Top Music Choices predict market returns?

None of this is market analysis or investment advice, and should not be interpreted as such. All of this research is from December 2018 and does not incorporate any information beyond that.

I wrote about my own Spotify sentiment analysis here, but did a pretty big project in undergrad, analyzing the stock market relative to the sentiment of the Number One Billboard song for that year. Below are the results of comparing the music choices of the United States to the S&P 500 from 2007 to 2017.

This article is broken into 3 Sections:

  1. The Unwrapping (skip this if you don’t want the data details)
  2. The Analysis
  3. The Wrap Up

Unwrapping: Research Methods

Rapid Miner was used to conduct a sentiment analysis on the song lyrics collected over a ten-year time frame, from 2007 to 2017. The song lyrics were gathered from AZ Lyrics, which was then stored in an Excel file. The research was performed in three parts.

  1. Frequency and weighting analysis based on word vectors and word lists
  2. Conduct Sentiment Analysis to cross compare the sentiment of songs to movement of S&P 500
  3. Regress percentage of negativity in song lyrics against S&P 500 returns to quantify the relationship

Data Preparation & Modeling

Text Processing: I began by implementing simple text processing techniques on the data, gathering frequency of terms and creating word vectors to determine the weight that each word in each song.

Sentiment Analysis: I then conducted sentiment analysis over the course of the time frame, on a 5-point scale ranging from N+ to P+ utilizing the Slang-SD dictionary for Pop Culture. I then exported those results to Excel in order to manipulate those data and cross compare it to the S&P 500.

The below graphs are plots of the most frequent words and the weights of the words based off their respective word vectors. The word with the most weight in each song is “love”, followed by “kiss” and “dance”.


The Analysis: Markets and Music

Below are the Number 1 Billboard songs for each year, relative to the S&P 500.

Source: Trading View, Author

Below is a sentiment analysis on the song lyrics, analyzing how the most “popular” choices of the time period mirror the market activity of the same time frame. The graphs map the below sentiment categories against the S&P 500.

2007: Irreplaceable, Beyoncé

In late 2007, the stock market crashed, and the U.S. fell into a Recession in December. Things went downhill from there. Subprime began to bubble to the surface. Apple gained 135% on the year.

In 2007, the top song of year was Beyoncé’s Irreplaceable. The song is 53% positive, reflecting the movement of the market well. Beyoncé is encouraging listeners to replace the man that doesn’t see the value in his partner. “Everything you own in a box to the left”, she says. Maybe she was reflecting on the number of people moving and purchasing homes. The market returned 5% this year.

2008: Get Low, Lil Jon and the Eastside Boyz

The market crashed this year. Volatility spiked, there was a lot of fear, and stocks went tumbling. Lehman Brothers went bankrupt, setting off a cascade of bank mergers and failures, amongst other things.

The top song of 2008 was Lil Jon’s and the Eastside Boyz Get Low. This song is mostly positive, but has some negative undertones, which was similar to the path that the S&P 500 took. In 2008, the market fell 37%. Many things got low this year.

2009: Boom Boom Pow, The Black-Eyed Peas

The beginning of the year was a continued drawdown from 2008. But in early March, the market began to recover and in June 2009, the Recession ended.

As the Black-Eyed Peas said, “I’m on that HD flat. This beat go boom boom bap”. Their positive lyrics reflected the market movement, and the S&P 500 returned 32% over the course of the year.

2010: Tik Tok, Kesha

The Volcker Rule was implemented this year. Dodd-Frank was passed in May, and Basel III regulations were implemented in September. The Federal Reserve conducted QE2 in November.

Kesha describes it best in her hit song, Tik Tok: “don’t stop, make it pop”, a split song between positive and negative. The relatively neutrality of her lyrics reflects the during-the-year flatness of the market well, before the end of year boost. The market returned 15% this year.

2011: Rolling in the Deep, Adele

Median household wealth fell 35% between 2005 and 2011. There was a flash crash in August 2011 and the United States credit rating was downgraded from AAA to AA+.

Adele’s Rolling in the Deep captures this mostly negative sentiment, and she describes her song as “My musical equivalent of saying things in the heat of the moment, and word-vomiting… I was very insulted, and wrote [“Rolling in the Deep”] as a sort of ‘f*ck you’.” Adele’s sentiments were echoed by many, I presume. The market returned 2% this year.

2012: Somebody that I Used to Know, Gotye ft Kimbra

This was an election year, with Barack Obama winning against Mitt Romney. There was a slowdown in growth, weakness in Europe, and the infamous fiscal cliff. Apple plunged 30% on the year and Facebook went public (and flopped). Pulte, a homebuilding company, was the number one stock in the S&P 500.

Somebody that I Used to Know details “a mutually ended relationship in which one person feels a pain that the other refuses to feel.” Perhaps Gotye was describing the fiscal cliff debates. Regardless, the song is mostly positive, and so was the market. The S&P 500 returned 13.4% this year.

2013: Thrift Shop, Macklemore and Ryan Lewis

The S&P 500 posted its biggest jump in 16 years, gaining more than 29%. The Fed began to scale back on QE, which shook the markets at the beginning of the year. However, by year end, all was positive. The top stock was Netflix (+298%), followed by Micron, BestBuy and Delta. Twitter went public this year.

The top song was Thrift Shop by Macklemore and Ryan Lewis. Macklemore describes the song: “It’s the polar opposite of (flaunting wealth). It’s kind of standing for like let’s save some money, let’s keep some money away, let’s spend as little as possible and look as fresh as possible at the same time.” Saving money. A good lesson for all.

2014: Happy

This year began the “Raging Bull Market”, as the market posted double-digit gains for the third year in a row. This was the year of Ebola, ISIS, oil, and Russia invading Ukraine. Alibaba went public. Facebook gained 43%. Amazon struggled as investors doubted their ability to make long-term profits. Companies bought back $438B worth of stock.

Perhaps Pharrell was right when he said, “clap along if you feel like a room without a roof” in his hit feel-good anthem that repeats the word “Happy” 56 times. This song is very positive. So was the market, rising 11.4% on the year.

2015: Uptown Funk, Bruno Mars and Mark Ronson

The S&P returned (0.7%) this year. The year was incredibly volatile, fraught with falling oil prices and slowdowns in China. Greece entered a debt crisis and EM weakness was pulling broad market indices down. The Fed raised interest rates by 25bps in their December meeting.

“Smoother than a fresh jar of Skippy”, as Bruno Mars says? Most definitely not. His song reflects the 2015 mood, with mostly negative sentiment in the lyrics.

2016: Love Yourself

This was another election year, with Trump beating Hilary Clinton. Oil prices recovered. Nvidia was the year’s top performer, posting a 223% return on the year. The energy sector lead the way, returning 23.65%. The market dipped early in the year, but recovered into February. Brexit (kind of) happened in June.

The S&P 500 returned 13.4%. Justin Bieber’s Love Yourself led the charts, a mostly positive song about moving on from an ex-partner. The sentiment reflects the market – and Bieber says “for all the times you rained on my parade” – no more of that. Bieber moved on, and so did stocks.

2017: Shape of You, Ed Sheeran

Another “Banner Year”. Trump’s tax cuts were signed into law. There was no big pullback and overall volatility was low. The bull market turned 9 years old. About 19% of taxpayers owned stocks directly, and ~50% participated through employee-sponsored retirement plans. The Information Technology sector returned almost 40% on the year.

The S&P 500 returned 19% this year. Ed Sheeran’s song Shape of You was the Song of the Year, in which he celebrates the physical aspects of love. The song is mostly positive, reflecting the movement in the S&P 500. Ed Sheeran probably loved the shape of the market, too.


The Wrap Up

Regression: I also ran a simple linear regression to determine a simple relationship between return data and the percentage of the song that fell into N or N+ categories.

SP 500i,t = Bo + B1Negativityi,t + e

The results were not statistically significant at the 5% level (unsurprising). Comparing the percentage of the song that was negative (N or N+) to that of the S&P 500 return yielded almost no statistical relationship.

Turns out, our music choices don’t quite predict the stock market (at least not for this dataset and dictionary). However, music does serve as an important part of our everyday lives. Artists support our general happiness (something that isn’t captured in market returns).

If you want to help independent artists during these times, the best thing to do is to donate to Patreon and buy merch! There are also sites like SweetRelief and Musicares and SymphonicDistribution that support many indie artists directly.

An Aside:

Here is my old research poster for those interested.

One thought on “Fermata and Staccato: Does Music Predict the Stock Market?

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