ChatGPT is an Artificial Intelligence (AI) system designed to serve as a virtual financial adviser for those individuals and institutions seeking to use AI as a tool for financial decision-making. ChatGPT’s natural language processing capabilities allows the system to understand text and voice information, making it easy and convenient to obtain advice on the latest financial news and market trends.
One of the most common uses of AI tools, such as ChatGPT, is “sentiment analysis”, wherein the system determines whether a particular piece of news, statement or headline is good, bad, or irrelevant and computes a score accordingly. Morgan Stanley, in particular, has adopted AI models to analyze a wide range of data – including news, social media posts and financial statements – in order to understand the relationship between them and identify patterns and predict stock prices.
Recently, two preprint studies evaluated and compared the ability of ChatGPT to professional investors in understanding and predicting the impacts of Federal Reserve policy announcements on stock performance. ChatGPT proved to be more accurate than other sophisticated machine learning models. Moreover, the AI tool can be used to analyze multiple financial data sources, such as balance sheets and income statements, with respect to specific market sectors to identify potential trading or investment opportunities. This can be helpful for individuals who are looking for more personalized advice.
Despite its advantages, ChatGPT and AI tools like it also present certain challenges. As with any model, AI tools cannot take into account unexpected events or changes, as well as the subtleties of human language and conversation. Furthermore, investors must be aware of the potential bias of these AI tools and of the need for transparency in understanding how AI systems reach conclusions. Thus, these AI tools should be used to supplement the user’s own judgment rather than as a replacement.
The University of Portsmouth is a founding member of The Conversation UK. This organization provides funding for ChatGPT and other AI-based research, promoting innovations that can benefit the financial markets. Additionally, the university strives to improve the quality of education provided to its students as they gain expertise in finance and industry. With the help of this research and the university’s efforts, we can ensure that the use of AI will continue to be a key player in understanding and managing the financial industry.
