Artificial intelligence has clearly been thriving. The capabilities of AI tools like ChatGPT justify the fervor surrounding the technology. From clearing exams to posing as a potential threat to several jobs, ChatGPT is advancing at an impeccable rate. Alongside its other capacities, a new report highlights how the AI tool can now predict stock moves.
According to Bloomberg, ChatGPT can now foretell the fate of stocks based on article headlines.
ChatGPT was employed to carry out market-relevant tasks, and two studies about the same were released. One of the studies used the chatbot to determine if Federal Reserve pronouncements were aggressive or meek, and the other to determine whether stock-related headlines were favorable or unfavorable.
The AI chatbot cleared both the above-mentioned tests. This further highlighted how a multitude of text from news articles, tweets, and even speeches could be converted into trading signals.
Here’s how ChatGPT was used to determine the movement of the stock market
The title of the second study was “Can ChatGPT Forecast Stock Price Movements? Return Predictability and Large Language Models.” The University of Florida’s Alejandro Lopez-Lira and Yuehua Tang prompted ChatGPT to pose as a financial professional. Following this, they asked the chatbot to analyze business news articles. Since the chatbot’s training data didn’t cover the time after late 2021, they employed news from that time period.
The study discovered a statistical relationship between the stock’s future movements and the replies provided by ChatGPT. This further indicates that the technology was able to accurately comprehend the significance of the news. Bloomberg went on to share an instance from the study,
“In an example about whether the headline “Rimini Street Fined $630,000 in Case Against Oracle” was good or bad for Oracle, ChatGPT explained that it was positive because the penalty “could potentially boost investor confidence in Oracle’s ability to protect its intellectual property and increase demand for its products and services.”
Furthermore, it should be noted that this is not new on Wall Street. Analysts have been using the same language models that underpin the chatbot to guide several strategies. However, the results suggest that OpenAI’s technology is now capable of understanding subtlety and context at a higher degree than ever before.
Slavi Marinov, head of machine learning at Man AHL, addressed the same and said,
“It’s one of the rare cases where the hype is real.”