Key Highlights
- The global AI market as of 2022 was worth $119.79b and could rise to $1.5trn by 2030.
- Two new papers published revealed that ChatGPT is the closest to humans when used in interpreting federal reserve statements and analyzing headlines.
The present situation across the world further affirms the maxim, “Change is the only constant thing in Life.” The world has been agog with the emergence of multitudes of Artificial Intelligence (AI) powered tools which many have described as making work/life easier and faster.
The AI tools cut across different social media platforms and across various sectors of the economy. The global AI market has had an influx of different tools with many now accepting it as a way of life. Precedence Research revealed that the global AI market size was estimated at $119.79b in 2022, and could rise to $1.5trn by 2030.
The Chat Generative Pre-Trained Transformer (ChatGPT) is a bot and language tool powered by AI technology that allows a user to engage in a dialogue like one is conversing with a human. It was released by OpenAI in 2022. Some of the standout features of ChatGPT are having conversations, being used in scenarios, providing feedback, and also admitting it’s wrong in certain instances. The tool has been explored in different markets, and sectors, among others.
With ChatGPT’s popularity, it has been applied and tested across different fields of endeavour, especially in the academic and educational sectors. The influx of AI into the world of finance is set to be the next thing following the results from two research publications. Shares are traded on stock exchanges, which is an avenues or a platform where a buyer and sellers can meet to trade them. Shares prices are determined by the law of demand and supply.
This typically shows that when the demand for a particular thing is high, the price tends to go higher, and when the demand is low, the price tends to go lower.
According to Bloomberg, two papers were published in April, that involved the use of AI Chabot in a market-relevant task. One of the tasks was to interpret whether federal reserve statements were hawkish or dovish.
The federal reserve statements are released by the central bank of the United States of America and include information on the economy as well as monetary policy decisions; hawkish and dovish refer to the central bank’s approach towards monetary policies like balancing inflation and economic stability. The former is an aggressive approach like increasing the interest rate, while the latter is a more relaxed approach which involves lowering the interest rate.
The second task was to determine if headlines were good or bad for a stock. Headlines are reports or news stories that give information on important and specific happenings to stocks or an industry. Investors usually lookout for headlines as they give information that could have an impact on their investment. The reports showed that ChatGPT aced both and could potentially be used in the coming years to trade signals in the markets like forex.
The first paper is titled Can ChatGPT Decipher Fedspeak? By A. L. Hansen and S. Kazinnik revealed that ChatGPT was the next after humans to predict on federal reserve statements. The results showed that it surpassed tools like BERT in predicting accurately. It also took it a step further by explaining statements just like analysts from the central bank which further solidifies it as a human-like AI tool.
The second paper titled Can ChatGPT Forecast Stock Price Movements? Return Predictability and Large Language Models by A. Lopez-Lira and Y. Tang. One of the limitations of ChatGPT (presently) is having limited knowledge of events after 2021, the researcher used ChatGPT as a financial expert to analyze a headline after 2021. The researchers found out that, the answers from ChatGPT were able to study all components of the news.
The results from both papers have shown that the use of ChatGPT in the stock market is a welcomed idea and could effectively be used by investors to profit from shares. It has also opened the way for more and subsequent research works on not just ChatGPT but AI tools. The coming years could also see the introduction of AI tools specifically created to function in the finance industry.
However, investors must know that ChatGPT works based on information, text, and others it could poll across the internet. This does not eliminate the risks that are attached to the market. Investors will also need to do some monitoring and analysis.
