April 12, 2023   Fintech AI/ML, Data-driven, FinTech and Alternative Finance, Fundraising, Investing, Trading, Innovation and Resources, Research   No comments

Is ChatGPT Better at Predicting Stock Prices Than Traditional Models?

Yahoo Finance | Jacob Zinkula | Apr 12, 2023

Unsplash Mariia Shalabaieva AI - Is ChatGPT Better at Predicting Stock Prices Than Traditional Models?

Image: Unsplash/Mariia Shalabaieva

ChatGPT can't see the future, but it already has value for investors looking to predict future moves in the stock market.  That's according to a new research paper published Monday in the Social Science Research Network by two University of Florida finance professors.

  • The researchers fed over 50,000 news headlines to a chatbot and used sentiment analysis to determine whether the headlines were good, bad, or irrelevant for companies' stock prices. The chatbot's scores were found to have a statistically significant positive correlation with the next-day stock performance of the analyzed companies.
    • The study suggests that using advanced language models, like ChatGPT, in investment decision-making can lead to more accurate predictions and enhance the performance of quantitative trading strategies.
    • The study also found that ChatGPT outperformed traditional sentiment analysis methods in predicting stock market returns.
  • Impact: AI tools like ChatGPT could be used to improve the stock market's efficiency by incorporating news faster into stock prices. He also said these tools could replace some investment analysts.

See:  AI/ML is Essential to Driving Future Revenue and Remaining Competitive

  • Cautions:
    • ChatGPT, a language model based on GPT-3.5, is not connected to the internet and therefore lacks access to the latest information beyond its training cutoff in September 2021.
    • This limitation hinders the model's ability to provide up-to-date insights on market trends, news, or developments that could impact investment decisions. Additionally, the model struggles with processing large texts and numerical data like accounting data.

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