Tyrone Schiff 1Holding a Share in Achievement

Introduction

All around the world, economic activity takes place through the purchase and sale of publicly traded companies on various exchanges. In London, people trade on the FTSE, and inChina, trading takes place on the Schenzen Stock Exchange. These exchanges, or markets, arecritically important to their respective country, because they act as a barometer of economic prosperity. In the United States, stock in companies is generally traded on one of two exchanges,the New York Stock Exchange or the NASDAQ. There are literally thousands of companies tochoose from on either one of these exchanges (NYSE, 2007). Every day, people invest exorbitantamounts of money in hopes that their company’s stock will climb. Yet, there are terrible risksassociated with investing in the stock market as well. Stock prices move up or down everytrading day, which means that an investment is just as likely to go sour as it is to soar. Individualschoose to invest in the stock market, instead of placing their money in a fixed-interest savingsaccounts or government bonds, because they want to grow their assets faster and larger. Bondsand savings accounts typically offer a constant interest rate, whereas, stocks in companies canexpand or contract enormously in a significantly shorter amount of time. The stock exchangeseems to follow the maxim, “with great risk comes great reward,” yet, simultaneously, thereexists substantial downside if you choose incorrectly.As a result of wanting to be right more times than wrong, economists and pundits havetried to establish methods to “predict” the future progress of a stock. Some methods includetechnical analysis; in which most of the scrutiny is based on the stock’s chart over time, andfundamental analysis; in which analysts look at financial statements, management techniques,and competitive advantage of a company. However, the problem persists; sometimes they are

Tyrone Schiff 2right and sometimes they are wrong. This is by no means the only technique in assessing theeconomic future. There are also economic indicators that look at the market more holisticallythan just a single stock price, which try to predict the overall movement of the economy. Anabbreviated list of these indicators include the Consumer Price Index (CPI), Producer Price Index(PPI), the unemployment rate, and interest rates. While these economic indicators are particularlyuseful in understanding the future movement of the economy, they do little in predicting theoutcome of individual stocks. The trick, therefore, is to find a consistent indicator that ismeasurable and reproducible that relates directly to a particular stock. It is my belief thatachievement motive imagery holds the key to unlocking this indicator. More specifically, theachievement motive imagery contained within a company’s annual “Letter to the Stockholder,”may have correlation to the future price of the stock in a company. The purpose of this paper willtherefore be to report my own findings along with plausible reasoning for why this may be thecase.

Prior Research

This study would not be possible without the empirical evidence and proven methods thathave already been gathered by Professor David G. Winter. He was instrumental in developing the process of scoring texts for power motive imagery, affiliation motive imagery, and achievementmotive imagery. In particular, previous studies have shown, especially those done by DavidMcClelland, that levels of achievement motive imagery in texts lead to varying degrees of economic success (McClelland, 1961). McClelland’s study revolved around the achievementmotive imagery found in children’s books in the 1920’s and 1950’s and their impact on variouseconomic factors (McClelland, 1961). He was able to prove that those countries that had higher achievement scores in their children’s stories lead to greater economic growth (McClelland,

Tyrone Schiff 31961). He looked at factors such as electricity produced in kilo-watt hours per capita and nationalincome in international units per capita (McClelland, 1961). With this as a basis, I wanted toexplore if there were other economic factors that may be the result of achievement motiveimagery.

Hypothesis

Before starting my research and analysis, I had some ideas as to the type of correlationthat may exist between the stock price of a company and the amount of achievement motiveimagery contained within the annual “Letter to the Stockholder.” I expected there to be acorrelation between high achievement motivation and an increase in the stock price. This runs insequence with the findings of McClelland that high achievement is representative of economicsuccess (McClelland, 1961). Furthermore, I anticipated the annual report to have immediate andshort-term impact. This means that from the time the “letter” was issued to the public, it wouldhave a quick effect on the stock price and would do so for no more than a year. Shareholderswould not respond to the “letter” for longer than a year, because a new one would come out inthe following year.It should be understood that this was a largely comparative study of different publiclytraded companies. Thus, I expected those company’s “letters” who were comparatively lower intheir achievement motive imagery to perform worse than those with comparatively higher achievement motive imagery. Therefore, I additionally expected there to be a continuum onwhich achievement motive imagery could be plotted. Companies on the higher end of thecontinuum would reap greater economic success than those on the lower end.