It's Alibaba's latest earnings call, and CEO Daniel Zhang is fielding questions during a Q&A. An analyst from the U.S. thinks Zhang sounds cautious, and leaves his forecast as is. But another analyst, who grew up in Shanghai as Zhang did, notes a certain cheerful nuance in his tone. After the call, she revises her earnings forecast for Alibaba upward. The market jumps.

It's an anecdote reported from earnings calls time and again: when an analyst and manager both come from the same, collectivist culture, the analyst somehow seems able to discern unspoken meaning in the manager's tone. This ability to detect underlying optimism or pessimism prompts these analysts to adjust their forecasts ⁠— and the market responds.

In a recent study, Rice Business professor Patricia Naranjo proved that this unspoken communication is real. When both analyst and manager in an earnings call come from collectivist cultures ⁠— that is, cultures that prize the group over the individual ⁠— the effect on the market is measurable,

Working with colleagues Francois Brochet of Boston University and Gregory S. Miller and Gwen Yu from the University of Michigan, Naranjo found that after an earnings conference call, markets responded more dramatically to revisions from analysts who had the same, collectivist ethnicity as the C-suite executives who spoke. The results suggest these "intra-cultural analysts" play a key role in getting stock prices to reflect managers' true outlook.

To measure this phenomenon, Naranjo and her team first amassed a sample of English-language earnings conference call transcripts from 2002 to 2012. The calls occurred within the three days around an earnings announcement. The final sample consisted of 57,740 conference calls held by 5,021 unique firms from across the globe.

The 24,901 executives from 42 countries who took part in the calls were mostly CEOs and CFOs, but there were also COOs, CMOs and IROs, among others. Of the managers, six percent were female and ten percent had a post graduate education. The average age of the executives was 52.77.

The researchers began with the premise that ethnicity helps shape an outlook that is either more or less individualistic. The researchers then assigned managers and sell-side analysts to likely ethnic groups, based on first and last names and an ethnicity-name matching technique. Assigned groups included Anglo-Saxon, Chinese, European, Hispanic, Indian, Japanese, Korean, Russian/Slavic, and Vietnamese.

Next, the researchers measured each ethnicity's individualism outlook, using an index based on analysis of 88,000 IBM employees in 72 countries. Unsurprisingly, Anglo-Saxons rated the highest on the individualism scale, followed by Europeans. Koreans and Chinese were the least individualistic, and were categorized as more group-oriented.

Now it was time to test the hypothesis. Did managers from more individualistic cultures have a more optimistic tone during conference calls? The prediction was based on psychology research showing that independent cultures – typically Western ⁠— place more emphasis on influencing individuals through shows of self-confidence and optimism. Because Q&As tend to be more spontaneous than scripted calls, Naranjo and her colleagues zeroed in on the Q&As to conduct their analysis. Their hypothesis proved correct: the managers from individualistic cultures did indeed speak with a more positive tone during the calls. They also used more first-person pronouns as they spoke.

The finding held true even for executives from individualistic cultures who had studied or worked in group-oriented cultures. Though these executives weren't quite as positive-sounding as counterparts who hadn't spent time in group-oriented cultures, the researchers concluded that the cultural traits the executives inherited from their native ethnic group were long-lasting.

Overall, the researchers also found, CEOs tended to speak more positively and use more singular first-person pronouns on average. Female managers used less optimistic language, and older managers tended to adopt a more pessimistic tone, but also used more singular first-person pronouns.

Finally, those analysts who shared a group-oriented cultural background with the managers on a conference call responded more strongly to the managers' tone ⁠— suggesting that they recognized the effect of culture on a speaker's tone of voice. Collectivist managers, as a rule, used less optimistic language.

When Naranjo's team studied individualistic analysts matched with group-oriented managers, the analysts' response was not as strong. Nor was there any pronounced special response when an analyst from a group-oriented culture was paired with an individualistic manager. When analysts are from different backgrounds as managers, in other words, there's no evidence that they will strongly revise a forecast in response to tone.

For investors tuning in to company conference calls, the findings speak volumes. For analysts and executives who share the same, collectivist background, important messages can go unspoken ⁠— and still be understood. Not only that, but when these "intra-cultural analysts" read between the lines and act on their intuitive cultural knowledge, the markets listen. Investors should take note as well.

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This article originally appeared on Rice Business Wisdom.

Patricia Naranjo is an assistant professor of accounting at Jones Graduate School of Business at Rice University.