Traders’ particular concern is AI’s fast-developing ability to produce highly convincing images and stories, and in huge quantities.
Powerful algorithms learn pattern recognition and natural language in ways that mimic the human brain, but they might still struggle with a genuine news report about fake news — for instance, a trustworthy news provider reporting the fake Pentagon explosion — “so might treat them as actual events and produce corresponding analytics,” Hafez added.
One London-based quant fund executive said the rise of AI was likely to push traders to use data companies that aggregate a wide range of sources into sentiment scores.in May might also have been exacerbated by investors’ worries over issues that hung over the market at the time, such as the U.S. debt-ceiling deadlock and the effect of higher interest rates.
Not all quant firms are likely to face this issue, however. One quant strategist at a leading investment group said firms have checks and balances designed to ensure “dangerous” data points do not trigger forced selling by quants that push prices down further, triggering more selling.