zero-revelaon regtech: detec+ng risk through corporate...
TRANSCRIPT
![Page 1: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/1.jpg)
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
Zero-Revela+onRegTech:
Detec+ngRiskthroughCorporateEmails
SeoyoungKimSantaClaraUniversity
@R/FinanceConference
Chicago,ILMay19,2017
Jointworkwith:
SanjivDas(SCU)andBhushanKothari(GoogleInc.)
![Page 2: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/2.jpg)
BigPicture
§ FinancialsareoIendelayedindicatorsofcorporatequality
§ Internaldiscussion(e.g.,emails)maybeusedasanearlywarningsystem
§ An automated plaRorm that parses emails and produces summarysta+s+cswouldbehighlyvaluable,since…
– It can analyze vast quan++es of textual not amenable to humanprocessing
– Itdoesnotrequirerevela+onof individualemailcontentexplicitlytomonitors/regulators
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 3: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/3.jpg)
OurPurpose
§ Ourpurpose is toexplore thepredic+vepowerof informa+onconveyedbyemployeeemails
§ Specifically,weareinterestedin:
§ Thesen+mentconveyedbyemailcontent
§ Theinforma+onconveyedbystructuralcharacteris+cs,suchasemailvolumeorlength
§ Othernon-verbalindicatorsofpoten+altrouble(e.g.,shiIingemailnetworkpaYerns)
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 4: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/4.jpg)
PreviewofResults
§ We find that the net sen+ment conveyed by Enron employee emailcontentisasignificantpredictorofstock-returnperformance
§ Interes+ngly, email lengthwas a stronger predictor of subsequent pricedeclinesthanthenetsen+mentconveyedbythemessagebodyitself.
§ Wealsoiden+fyotherpoten+alindicators/predictorsofescala+ngriskormalfeasance.
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 5: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/5.jpg)
Data
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 6: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/6.jpg)
TheEnronEmailCorpus
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 7: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/7.jpg)
TheEnronEmailCorpus
§ Ini+alSample:– Approximately500,000emails
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 8: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/8.jpg)
TheEnronEmailCorpus
§ Ini+alSample:– Approximately500,000emails
– January2000throughDecember2001
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 9: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/9.jpg)
TheEnronEmailCorpus
§ Ini+alSample:– Approximately500,000emails
– January2000throughDecember2001
– First made publicly available by the Federal Energy Regulatory Commission (FERC)duringitsinves+ga+onofEnron
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 10: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/10.jpg)
TheEnronEmailCorpus
§ Ini+alSample:– Approximately500,000emails
– January2000throughDecember2001
– First made publicly available by the Federal Energy Regulatory Commission (FERC)duringitsinves+ga+onofEnron
– SubsequentlyculledanddistributedbytheCarnegieMellonCALOproject
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 11: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/11.jpg)
TheEnronEmailCorpus
§ Ini+alSample:– Approximately500,000emails
– January2000throughDecember2001
– First made publicly available by the Federal Energy Regulatory Commission (FERC)duringitsinves+ga+onofEnron
– SubsequentlyculledanddistributedbytheCarnegieMellonCALOproject
§ Caveats/Redac+ons– TheEnroncorpushasbeenscrubbedover+meforlegalreasonsandtohonorrequests
fromaffectedemployees.
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 12: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/12.jpg)
TheEnronEmailCorpus
§ Ini+alSample:– Approximately500,000emails
– January2000throughDecember2001
– First made publicly available by the Federal Energy Regulatory Commission (FERC)duringitsinves+ga+onofEnron
– SubsequentlyculledanddistributedbytheCarnegieMellonCALOproject
§ Caveats/Redac+ons– TheEnroncorpushasbeenscrubbedover+meforlegalreasonsandtohonorrequests
fromaffectedemployees.
– Ex(1):user“fastow-a”isnotablymissing
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 13: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/13.jpg)
TheEnronEmailCorpus
§ Ini+alSample:– Approximately500,000emails
– January2000throughDecember2001
– First made publicly available by the Federal Energy Regulatory Commission (FERC)duringitsinves+ga+onofEnron
– SubsequentlyculledanddistributedbytheCarnegieMellonCALOproject
§ Caveats/Redac+ons– TheEnroncorpushasbeenscrubbedover+meforlegalreasonsandtohonorrequests
fromaffectedemployees.
– Ex(1):user“fastow-a”isnotablymissing
– Ex(2): Email chaYer surrounding Mr. Skilling’s sudden resigna+on on 8/14/2001 hasbeenexpunged.
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 14: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/14.jpg)
TheEnronEmailCorpus
§ Ini+alSample:– Approximately500,000emails
– January2000throughDecember2001
– First made publicly available by the Federal Energy Regulatory Commission (FERC)duringitsinves+ga+onofEnron
– SubsequentlyculledanddistributedbytheCarnegieMellonCALOproject
§ Caveats/Redac+ons– TheEnroncorpushasbeenscrubbedover+meforlegalreasonsandtohonorrequests
fromaffectedemployees.
– Ex(1):user“fastow-a”isnotablymissing
– Ex(2): Email chaYer surrounding Mr. Skilling’s sudden resigna+on on 8/14/2001 hasbeenexpunged.
– Overall,detailsregardingexclusioncriteriahavenotbeenmadepublic,andouranalysesshouldbeviewedasexploratoryandprescrip+ve
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 15: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/15.jpg)
CuringtheData
§ Wefocuson“sent”emails(ratherthanallemails)inorderto…– AnalyzecontentspecificallywriYenbyEnronemployees
– Avoidprocessingthesamecontentmorethanonce
– i.e.,ifuser“lay-k”sendsanemailto“skilling-j”
§ Otherfiltersappliedtoremovenoisy(junk)mail:– Emailsgreaterthan3,000charactersinlength
– Emailssenttomorethan20recipients
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 16: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/16.jpg)
OurFinalSample
§ Overall,weobtain…– TheEnronemailcorpusfromtheCarnegieMellonCSsite
– Stockpriceandstockreturninforma+onfromCRSP
– Newsar+clesfromFac+vaPRNewswire
– Sen+mentworddic+onariesfromtheHarvardInquirerandtheLoughranandMcDonaldsen+mentwordlists
§ FinalSample:– 144dis+nctemployees
– 113,266sentemails
– January2000throughDecember2001
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 17: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/17.jpg)
EnronCodePipeline
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 18: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/18.jpg)
S1.Rmd(readinallemails,preprocess)
S2.Rmd(processandparseallemails)
Mails2.RDataDataframewithheader,messagebody,date,from,to,cc,nchar,year,month,week.
Mails1.RData(1.3GB)>½millionemails
S3.RmdResolvemul+pleuseraccounts;summarystats;de-duplica+on;plotsover+me;moodscoring(weekxuser);calculatereturnsfromstockdata;regressionsofsen+mentandreturns;wordclouds;emailnetworks.
ENE_daily.csv(stockdata)
MoodScoredDF.RData(weeklysen+mentscoreandreturns)
Mails3.RData(allemailsdataandreturns)
S3_2.Rmd(networkanalysis)
Networkoutput(adjacencymatrices,stats,degreedistribu+on)
WeeklyReturn.csv(returns)
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 19: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/19.jpg)
S4.Rmd(listof1000mostusedwordsover+me)
Mails3.RData(allemailsdataandreturns)
TDM.RData(termdocumentmatrix:76518wordsxweeks;1353negwords,288poswords,206uncwords,105weeks.)
WeeklyReturn.csv(returns)
MoodScoredDF.RData(weeklysen+mentscoreandreturns)
ui.R,server.R(Shinyapptoshowwordplayover+me)
S5.Rmd(topicanalysis)
FacEva_Extract.Rmd(Extractnewsar+clesfromFac+va) FacEva
FacEva_Analysis.Rmd(Processdatatodataframeanddoanalysis)
MoodScoredNews.RData(weeklysen+mentscore;POStagging)
TDMNews.RData(Weeklynews)
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 20: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/20.jpg)
Analyses
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 21: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/21.jpg)
Table1.SummarySta+s+csofSentMail
Theaverageemailis362charactersinlength,withamedianof163characters…
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 22: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/22.jpg)
Table1.SummarySta+s+csofSentMail
…withanaverageof1.77recipientspersentmail.
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 23: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/23.jpg)
Table1.SummarySta+s+csofSentMail
Manyemails(closeto11%)aresimplyforwardedwithoutaddedtext.
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 24: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/24.jpg)
Figure1.AverageEmailLengthoverTime
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 25: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/25.jpg)
Figure1.AverageEmailLengthoverTime
Year2000:
Year2001:
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 26: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/26.jpg)
Figure1.AverageEmailLengthoverTime
Year2000:
Year2001:
Ini+ally,averageemaillengthisfairlystable,straddlingroughly400charactersperemail.
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 27: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/27.jpg)
Figure1.AverageEmailLengthoverTime
Year2000:
Year2001:
Ini+ally,averageemaillengthisfairlystable,straddlingroughly400charactersperemail.
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 28: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/28.jpg)
Figure1.AverageEmailLengthoverTime
Year2000:
Year2001:
MarkeddeclineinaveragelengthasweapproachEnron’sdemise(approx.50%).
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 29: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/29.jpg)
Figure2.EmailSen+mentandDisagreementoverTime
NetSenEment:
Disagreement:
𝑃𝑜𝑠−𝑁𝑒𝑔/𝑃𝑜𝑠+𝑁𝑒𝑔
1− |𝑃𝑜𝑠−𝑁𝑒𝑔|/𝑃𝑜𝑠+𝑁𝑒𝑔
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 30: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/30.jpg)
Figure2.EmailSen+mentandDisagreementoverTime
NetSenEment:
Disagreement:
𝑃𝑜𝑠−𝑁𝑒𝑔/𝑃𝑜𝑠+𝑁𝑒𝑔
1− |𝑃𝑜𝑠−𝑁𝑒𝑔|/𝑃𝑜𝑠+𝑁𝑒𝑔
Basedoncontext-dependentsen+mentdic+onariesforwordclassifica+on
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 31: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/31.jpg)
Figure3.Fac+vaNewsCoverageoverTime
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 32: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/32.jpg)
Figure3.Fac+vaNewsCoverageoverTime
Spikeinnumberofar+clesasweapproachEnron’sdemise.
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 33: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/33.jpg)
Figure4.Fac+vaNewsSen+mentoverTime
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 34: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/34.jpg)
Figure4.Fac+vaNewsSen+mentoverTime
Netsen+mentfrombody
Netsen+mentfromheader
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 35: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/35.jpg)
Figure5.StockReturnsandNetSen+mentoverTime
Netsen+mentacrossEnronemployeeemailsover+me
MovingaveragestockreturnsforEnronover+me
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 36: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/36.jpg)
Figure6.StockPricesandNetSen+mentoverTime
Netsen+mentacrossEnronemployeeemailsover+me
MovingaveragestockpriceforEnronover+me
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 37: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/37.jpg)
Figure7.StockReturnsandEmailLengthoverTime
MovingaveragestockreturnsforEnronover+me
MovingaverageemaillengthacrossEnronemployeeemailsover+me
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 38: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/38.jpg)
Figure8.StockPricesandEmailLengthoverTime
MovingaveragestockpriceforEnronover+me
MovingaverageemaillengthacrossEnronemployeeemailsover+me
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 39: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/39.jpg)
Figure8.StockPricesandEmailLengthoverTime
MovingaveragestockpriceforEnronover+me
MovingaverageemaillengthacrossEnronemployeeemailsover+me
Perhaps,asrisk/malfeasanceescalates,emailsbecomeshorter,asemployeesarelesslikelytoincludedetailsinmessagesentviathecorporateserver
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 40: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/40.jpg)
Table2.EmailContentandStockReturns
DependentVariable=StockReturnst
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 41: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/41.jpg)
Table2.EmailContentandStockReturns
DependentVariable=StockReturnst
Onestdev(i.e.,0.019)decreaseinNetSen+mentisassociatedwitha4.5%declineinstockreturns…
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 42: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/42.jpg)
Table2.EmailContentandStockReturns
DependentVariable=StockReturnst …butnolongersignificantwhenwecontrolforemaillength.
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 43: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/43.jpg)
Table2.EmailContentandStockReturnsoverTime
DependentVariable=StockReturnst
Overall,20-characterdeclineinmovingaverageemaillengthisassociatedwitha1.17%declineinstockreturns.
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 44: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/44.jpg)
Table3.EmailContentversusFac+vaNewsContent
DependentVariable=StockReturnst
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 45: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/45.jpg)
Table3.EmailContentversusFac+vaNewsContent
DependentVariable=StockReturnst
Emailcontentcontainsmoreinforma+onthannews-headercontent….
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 46: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/46.jpg)
Table3.EmailContentversusFac+vaNewsContent
DependentVariable=StockReturnst
….Butneitherissignificantwhenaccoun+ngforemaillength.
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 47: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/47.jpg)
Table3.EmailContentversusFac+vaNewsContent
DependentVariable=StockReturnst
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 48: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/48.jpg)
Table3.EmailContentversusFac+vaNewsContent
DependentVariable=StockReturnst
Ontheotherhand,emailcontentcontainslessinforma+onthancontentfromthenewsbody…(couldthisbeduetoredac+onsontheEnronemailcorpus?)
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 49: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/49.jpg)
Table3.EmailContentversusFac+vaNewsContent
DependentVariable=StockReturnst
….But,again,neitherissignificantwhenaccoun+ngforemaillength.
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 50: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/50.jpg)
SummaryandImplica+ons
§ Thus far,wehave shown that thenet sen+ment conveyedbyemployeesentmailsisasignificantpredictorofstock-returnperformance
§ Interes+ngly, email lengthwas a stronger predictor of subsequent pricedeclinesthanthenetsen+mentconveyedbythemessagebodyitself.
§ Overall,emailcontentmaybecontrolledormanipulated
– Thus, we are also (and perhaps evenmore!) interested in the non-verbal,interac+on-ornetwork-basedindicatorsofpoten+altrouble.
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 51: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/51.jpg)
Addi+onalExplora+ons
Otherdimensionsripeforinves+ga+on….
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 52: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/52.jpg)
Figure11.EmailNetworks
Year2000,Q4:
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 53: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/53.jpg)
Figure11.EmailNetworks
Year2001,Q4:
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 54: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/54.jpg)
Figure13.VocabularyTrends
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 55: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/55.jpg)
Figure13.VocabularyTrends
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 56: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/56.jpg)
Figure13.VocabularyTrends
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 57: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/57.jpg)
Figure14.TopicAnalysisoverTime
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
![Page 58: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/58.jpg)
Figure14.TopicAnalysisoverTime
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses
TopicsassignedvialatentDirichletalloca+on(LDA)
![Page 59: Zero-Revelaon RegTech: Detec+ng Risk through Corporate Emailspast.rinfinance.com/agenda/2017/talk/SeoyoungKim.pdf · S. Kim / SCU 2017 Motivation Data Analyses Concluding Remarks](https://reader033.vdocuments.mx/reader033/viewer/2022042103/5e8074387103980b460db10b/html5/thumbnails/59.jpg)
ConcludingRemarks
§ We introduce an automatedplaRorm to parse corporate email content,andwefindthatthenetsen+mentconveyedbyemployeesentmailsisa+melyindicatorofstock-returnperformance.
§ Non-verbal indicators, such as email length and network structure, arepar+cularlypromisingavenuestoexplore.
§ Overall, we suggest the promise of a regulatory technology (RegTech)approach by which to systema+cally parse email content and networkstructure to detect indicators of risk ormalfeasance on an ongoing andmore+melybasis.
Thankyou.
S. Kim / SCU 2017 Data Concluding Remarks Motivation Analyses