More than ChatGPT: How AI is Revolutionizing Finance
With the recent rise in the popularity of artificial intelligence, it is no surprise that various forms of AI have rapidly made their way into various industries. The transportation, retail, and marketing industries, among others, have seen the implementation of AI chatbots and digital assistants. In the stock market, AI is making waves by transforming how investors and financial advisors invest and interact. In fact, financial firms that actively invest in artificial intelligence have an average growth rate of 35%, an above-average rate in comparison to their competitors. From pattern identification and risk management to portfolio optimization and improved efficiency, AI offers numerous benefits to both individual investors and corporations alike.
Artificial intelligence provides several ways to improve investment returns. Firstly, AI algorithms can quickly analyze large volumes of data, identifying patterns in financial markets. With this data, AI can be used to optimize portfolios by analyzing the data on different investments and offering suggestions for diversification, reducing overall portfolio risk. This aids in risk management by monitoring market trends and identifying potential risks before they become problematic, allowing investors and traders to minimize risky investments and safely secure profits.
Investors can also leverage forms of AI to gain automated insights from various sources, such as company earnings transcripts, social media, and financial databases. This can uncover specific unseen relationships between securities and market indicators that traditional human analysis might have overlooked. In recent years, an increasing number of companies have been leveraging these AI tools to provide investment insights and information. Companies such as AlphaSense and Canoe use meta-data analysis, AI machine learning, and natural language processing to offer their customers market intelligence and information. Other companies, such as Trading Technologies International, the Kavout Corporation, and IntoTheBlock use AI to generate price forecasts and identify real-time trading patterns and strategies. Some companies, such as Trade Ideas, are even using artificial intelligence to conduct trades. Trade Ideas uses an artificial trading platform known as “Holly” to place daily trades that have the highest statistical chance to return a profit. Holly, while being backed by a group of trade professionals, independently enters and closes between five to 25 trades per day.
While AI offers tremendous potential, it is important to remember that market conditions and individual circumstances can still impact investment outcomes. However, the short and long-term influences of AI in the stock market are undeniably impactful. Artificial intelligence paired with machine learning can easily manage portfolios at nearly any scale. In our current day, AI is still at its earliest stages, as it still makes major mistakes and can produce flawed outputs. With its improvement and development, however, the financial industry will become increasingly dependent on it as it becomes utilized in multiple aspects of the industry. Artificial intelligence is likely to play an increasingly crucial role in helping traders and corporations achieve their financial goals in the upcoming future.
Sources:
https://www.nasdaq.com/articles/what-to-know-about-the-growing-impact-of-ai-in-financial-services
https://emeritus.org/blog/examples-of-artificial-intelligence-ai/
