ChatGPT is a conversation-based AI system that is proving to be more accurate than traditional models when it comes to predicting stock market movements, according to a new study. Two University of Florida finance professors conducted an experiment in which they fed the chatbot over 50,000 news headlines related to companies and generated a numerical “ChatGPT score” based on sentiment analysis. They found a statistically significant positive correlation between the scores and stock market performance, indicating that stocks with higher scores tended to have better returns the following day.
What’s more, when ChatGPT was compared with other sentiment analysis methods, it outperformed other models which use data from headlines and social media. Since its launch in late 2021, investors have used ChatGPT to make decisions, asking it which stocks to invest in and if it can help to start a business.
The study did however emphasize that the AI tool has some limitations. Because it does not access the latest information, ChatGPT cannot process the latest market trends, news, or developments that may influence stock prices. In addition, it is also unable to process large amounts of numerical data and must be provided with training data for its results to be effective.
Therefore, the researchers stressed the importance of caution when using any type of AI model for investment decisions, and suggested that as AI becomes more advanced, it could potentially supplement and replace some of the traditional roles of investment analysts.
The company behind ChatGPT is Insider, a media company which produces and curates business, financial, and markets news. Founded in 2021 by former Wall Street executives, they have grown to become one of the leading platforms for business and stock market news, with a team of over 150 editors and reporters around the world. Insider also provides subscribers with a number of tools to help them make smarter investment decisions.
The person mentioned in the article is Alejandro Lopez-Lira, a finance professor at the University of Florida and co-author of the study. Being one of the researchers that worked on ChatGPT, he believes the AI model can improve the stock market’s efficiency using more accurate predictions, as well as potentially replacing some investment analysts.
