According to a couple of tests, ChatGPT has demonstrated an ability to anticipate swings in the stock market based on company news and is capable of interpreting statements made by the Federal Reserve.
According to Business Insider’s reporting, the first testing was carried out at the Richmond Federal Reserve and it discovered that ChatGPT-4 is capable of classifying Federal Reserve statements into five distinct categories in a manner that is quite similar to how human readers do it.
The AI chatbot was given the assignment by the researchers to categorize Federal Reserve remarks as either dovish, predominantly dovish, neutral, mostly hawkish, or hawkish. The outcome was superior than previous artificial intelligence models in terms of matching classifications made by human readers.
According to Business Insider, the GPT-4 wrote the following about one statement it deemed to be hawkish: “The sentence indicates the committee’s expectation to start implementing its balance sheet normalization program soon, which is a clear signal of tightening monetary policy,” regarding the statement. “As long as the economy evolves as anticipated, this is a clear signal of tightening monetary policy.”
Another study conducted at the University of Florida investigated ChatGPT’s capacity to forecast movements in the stock market based on public announcements made by corporations. The researchers discovered that the most recent version of the AI demonstrated a strong ability to forecast movements.
“We use ChatGPT to determine whether a certain headline represents positive, negative, or neutral news for the stock prices of companies. The researchers noted that “we then compute a numerical score and document a positive correlation between these ‘ChatGPT scores’ and subsequent daily stock market returns.”
“Additionally, ChatGPT performs better than conventional methods of sentiment analysis. We have discovered that models with a more fundamental structure, such as GPT-1, GPT-2, and BERT [an existing finance model], are unable to reliably anticipate returns.
The team continued by stating that the integration of AI analysis into trading methods is expected to become the industry standard in the near future.
In the past few months, ChatGPT and other language model AIs of a similar ilk have exploded onto the market, and many companies have begun investigating how these technologies might be utilized.
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