Recent study findings indicate that AI large language chatbot ChatGPT can accurately predict stock market movements. This has raised the question of whether artificial intelligence models can replace investment analysts in the future. The paper released by University of Florida professors indicated that ChatGPT outperformed traditional sentiment analysis methods.
The study results conclude that incorporating advanced language models such as ChatGPT into decision-making processes of stock market analysis can improve strategies used for quantitative trading. To determine the OpenAI chatbot’s abilities in predicting future stock market moves, the professors fed it over 50,000 news headlines about certain companies – spanning back to October 2021. After analyzing the ChatGPT score – a sentiment analysis – the professors found a positive correlation between the scores and the companies’ future stock performance.
However, the study’s co-author Alejandro Lopez-Lira warned investors to not solely rely on the chatbot, as AI models can lack knowledge in certain areas of the stock market. AI models don’t always have the means to process large amounts of numerical data – like accounting data – and can’t accurately identify recent trends and developments.
AI is making tremendous strides in the financial sector but there are concerns about ChatGPT and similar language-based models’ accuracy in finance. The longest-standing challenge is to effectively apply them in targeted finance-related tasks that require more in-depth analysis. This includes not only headlines but also target prices, which were not included in the study. Still, the paper’s authors remain optimistic that AI models like ChatGPT can be used to improve areas like asset management, stock trading, investing, and finance regulations.
The increasing popularity of ChatGPT has triggered a race for AI dominance among tech companies. Google has launched its own conversational AI assistant, Bard, while Twitter CEO Elon Musk is working on an AI platform called “TruthGPT”. With this increasing interest in AI, US Senate Majority Leader Chuck Schumer has put forward a regulatory proposal to prevent potentially catastrophic damages brought on by generative AI.
Microsoft-backed ChatGPT is indeed a disruptive creation and a potentially profound resource for finance. For the technology to remain valuable, more research needs to be done to ensure its accuracy and improve nuanced financial tasks.
