- 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 current global situation confirms the adage that “Change is the only constant in life.” The world has been agog with the emergence of a plethora of AI-powered tools that many have described as making work/life easier and faster.
The AI tools are applicable across various social media platforms and economic sectors. The global AI market has seen an influx of new tools, with many people now accepting AI as a way of life. According to Precedence Research, the global AI market will be worth $119.79 billion in 2022 and could reach $1.5 trillion 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 findings of both papers indicate that using ChatGPT in the stock market is a welcome idea that investors can use to profit from shares. It has also paved the way for future research on not only ChatGPT but also AI tools. AI tools designed specifically for the finance industry may also be introduced in the coming years.
However, investors should be aware that ChatGPT is based on information, text, and other sources that it may poll across the internet. This does not eliminate the risks associated with the market. Investors will also need to monitor and analyze their investments.
SOURCE- Nairametrics
