The globally most downloaded research paper this month, “Can ChatGPT Forecast Stock Price Movements? Return Predictability and Large Language Models,” boasts the names of its authors, Dr. Alejandro Lopez-Lira, and Dr. Yuehua Tang, both esteemed scholars from the University of Florida, US.
In this exhilarating study, large language models, or LLMs, take centre stage. These AI entities, colossal in knowledge and formidable in their analytical strength, have more in common with Herculean leviathans than mundane machines. They prove their mettle in this academic masterstroke, scrutinising the credibility of news outlets and prognosticating stock market returns. The scenario may smack of a scene from a vivid Arthur C. Clarke fiction to the uninitiated.
Envisage a moment where these formidable models, nurtured on the teeming data rivers, meticulously mine through the daily onslaught of financial news, separating the consequential from the quotidian. Their insightful gaze could discern patterns invisible to the human eye, differentiating the ripple effect of a groundbreaking news story from the monotony of daily updates.
These earth-shattering revelations from the study could spark a paradigm shift in financial decision-making. Imagine an investment world where AI models scrupulously sift through articles, dismissing those from questionable sources, corroborating those from trusted ones, and pinpointing links between news credibility scores and ensuing stock market returns. Such an evolution could profoundly transform investment strategies and bolster investor confidence.