ChatGPT is a type of artificial intelligence (AI) tool that is increasingly being adopted by investors looking to analyse trends in business news and financial markets. This technology is based on natural language processing (NLP) and machine learning models, and has the potential to be useful as a virtual financial assistant. By using this technology, investors can gain insights into potential investment opportunities, portfolio diversification techniques and risk management.
Morgan Stanley is one company that uses AI tools such as ChatGPT to analyse news headlines, social media posts and financial statements, to gain insights and make predictions about stock prices. Various studies have explored the effectiveness of ChatGPT, with mixed results. A recent preprint paper for example, tested the tool’s ability to predict stock performance and found a positive correlation between it and actual market movements.
ChatGPT can also provide valuable insights into financial markets, such as how predictions from the US Federal Reserve (central bank) might impact them. A different preprint study showed that ChatGPT models fine-tuned to analyse Fed announcements were more accurate than professional-level qualitative models used to understand “Fedspeak”.
In addition to tracking the markets, ChatGPT has the potential to be useful for helping users manage their own investment portfolio. By analysing financial data such as balance sheets and income statements, the AI can help identify patterns that may indicate opportunities or warning signs. AI tools may also be able to customise an individual’s portfolio by analysing personal factors such as financial situation and risk tolerance.
It is important to remember though that AI tools may have their own limitations. They can’t account for unexpected changes and events, nor can they replicate the level of expertise and insight a human being can provide. Additionally, there must be greater transparency about the decision-making process in order for a user to trust and use the predictions.
Finally, Eun Young (EY) Oh, a Senior Lecturer in Economics and Finance from the University of Portsmouth, warns that one should not replace their own judgment with AI predictions – instead, they should use them to supplement their judgement. This includes doing your own research prior to investing and accepting the right level of risk.
Ultimately, while AI tools like ChatGPT hold great potential to help investors on their journey to making smart decisions, they should be used as an additional resource and not a replacement for common sense and human judgement.
