ChatGPT can predict stock market, understand Fed statements, studies claim

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One study found that ChatGPT-4 can classify Fed statements as dovish, mostly dovish, neutral, mostly hawkish or hawkish.

Researchers tasked the AI chatbot with classifying Fed statements as dovish, mostly dovish, neutral, mostly hawkish or 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, as long as the economy evolves as anticipated,” GPT-4 wrote of one statement it deemed hawkish, according to Business Insider.

Another study from the University of Florida examined ChatGPT’s ability to anticipate stock market moves based on public corporate news, and found that the AI’s latest version displayed a strong ability to predict moves. “We use ChatGPT to indicate whether a given headline is good, bad, or irrelevant news for firms’ stock prices. We then compute a numerical score and document a positive correlation between these ‘ChatGPT scores’ and subsequent daily stock market returns,” the researchers wrote.

One study found ChatGPT-4 is capable of sorting statements from the Fed into five categories in a manner that aligns closely with human readers.Another study found that AI’s latest version displayed a strong ability to predict moves based on public corporate news.“Further, ChatGPT outperforms traditional sentiment analysis methods. We find that more basic models such as GPT-1, GPT-2, and BERT [an existing finance model] cannot accurately forecast returns.

The team went on to say that incorporating AI analysis into trading strategies is likely to become the norm., and many businesses have begun exploring how they might be used.

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ChatGPT can predict the stock market and understand Fed statements, studies claimOpenAI's ChatGPT-4 has proven capable of deciphering Fed statements and predicting the stock market based on corporate news, according to a pair studies.
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