In this context, the finance and investment sector was not far from these rapid transformations, given the role that technology plays in this sector, particularly in technical and financial analysis, and therefore the role that play, and could play in the future, modern applications, to revolutionize the world of finance and business. It affects the small investor and even the big and giant companies and economies of countries.
One of the questions that arises in this context is to what extent these applications can be used to determine the investment tendencies of individuals, and to what extent their effectiveness in providing real investment advice that replaces the financial adviser , as well as how can these technologies be employed and leveraged in the proper management of funds? And other questions.
Taking advantage of this momentum, financial institutions are seeking to develop the use of these technologies and to offer new applications based on them to support their clients in their investment decisions, based on a set of modern data analyzed automatically. on a number of assets.
For example, one of the largest and most famous U.S. banks, JPMorgan Bank, intends to use AI applications to advise investors, in a move that is the first in this context, according to CNBC. which indicated that the bank is adopting A plan software (somewhat similar to ChatGPT) that helps clients choose the most suitable investment for them, through an application under development called IndexGPT.
Unreliable source
In statements exclusive to Sky News Arabia Economy, Nicolas Gradojevet, a professor in the Department of Economics and Finance at Canada’s University of Guelph, whose research interests include (artificial intelligence and big data analytics) , says:
Free AI chatbot services like ChatGPT are still not “reliable” to make a reasonable and reliable investment decision. Accordingly, investors should resort to professional services that use specialized AI tools in their analyses.
He points out that investment banks and hedge funds have been using artificial intelligence in their business practices for at least 25 years, explaining that one of the main uses of artificial intelligence in investing is related to what it is called arbitrage trading (selling and buying an asset at the same time to take advantage of the price difference in different markets or in various forms) because AI predicts or detects price errors in different price classes. assets that result in profitable, almost risk-free transactions.
In addition, he adds, fast AI-based “algorithmic trading” systems can use “technical indicators” (i.e. price signals based on historical prices or recurring patterns of volume), which can generate significant profits for investors.
He points out that “artificial intelligence can analyze large datasets containing macroeconomic and corporate information and make stock or bond recommendations consistent with overall portfolio goals and investors’ risk appetite. “.
Practical experience
Relying on “reliable” agencies for AI investment advice is seen as the “best bet” without clients having to research their own options through which they might fall for bogus advice.
So far, an app like ChatGPT does not provide direct advice on investing in specific stocks, for example. Through hands-on experience, and when “Sky News Arabia Economy” asked the app a question regarding investing in a specific stock, the answer came as follows:
“Sorry, but I cannot make a direct recommendation on investing in a specific stock or any other stock…Please be understanding as I am an AI language model and do not have the ability to make financial or investment recommendations ..If you want to invest in this stock or any stock Finally, it is important that you do the necessary research and consult a professional financial adviser before making a decision.. You should analyze the relevant financial and economic data and review news related to the company and its industry and world events that may affect market performance.
The same response also stated: “Investing in stocks involves financial risks, as you may be exposed to capital losses, and it is important that you are fully aware of market risks and have the capacity to bear these risks. .I apologize again, but I cannot be a reliable source of recommendations.” investment”.
Financial management
In a related context, a professor from the Department of Economics and Finance at Canada’s University of Guelph talks about “How can artificial intelligence help people manage their money?”, noting that:
AI can study people’s spending habits and suggest how they can improve their budget and save money. Artificial intelligence is also used in risk management by banks to detect fraud. This allows banks to monitor and manage any identity or credit card theft. Whenever the AI detects a suspicious and out-of-the-ordinary transaction, it alerts the bank and/or the customer which will prevent potential fraudulent transactions. Artificial intelligence is also widely used in credit risk management, both for companies and for individuals.
He points out that an important advantage of AI is its ability to process large amounts of data and classify information into multiple data sets. Once the data is organized, for example:
AI can understand a new customer’s credit status and whether the customer qualifies for a loan. Similarly, the AI can decide on the appropriate interest rate that should be offered to the customer. All of these uses of AI will lead to a better allocation of resources (i.e. money) and a more efficient economy.
Scientific recommendations .. and “not guaranteed” profit
For his part, Mohamed Saeed, chairman of the board of directors of “IDT” Consulting and Systems Company, indicates in exclusive statements to “Economy Sky News Arabia” that “artificial intelligence applications can be used to a limited extent in stock market, by identifying the best investment strategies, based on the available databases, including the history of stock movements and future expectations accordingly.
But on the other hand, “it doesn’t necessarily help to ensure gains are realized,” according to Saeed, who points out that “the movement of stocks follows other rules in addition to scientific estimates based on data. Among these rules are the sudden issues and decisions, and even investor sentiments that affect the market.” As well as business-related developments and events.
He adds: “If you need precise scientific frameworks to determine the future direction of a title, artificial intelligence will help you there, but it is not certain that it guarantees a gain”, pointing out that “the boom artificial intelligence has improved the performance of many investors who suffered from scientific barriers to trading on the stock market.
On the other hand, the technology expert points out that companies and financial advisors are using artificial intelligence technologies to help their clients identify key trends, explaining that in recent years many methods have emerged that have significantly improved this trend, until there was interest in the presence of artificial intelligence departments in companies. , whether it has become an influential element in the development of strategies or is still in the research and development phase on which to build in the future, and some companies are now selling artificial intelligence recommendations on the investment portfolio trends.
3 risks
A 2020 article on AI by Lilly Bailey and Gary Gensler argued that while generative AI could provide incredible benefits in helping financial regulators deliver their financial analytics, it creates three significant risks to stability. . The first of these is the “obfuscation” that AI tools are opaque to all but their creators. It might be possible to remedy this by asking them to publish their internal guidelines in a standardized way, but this seems unlikely.
The second such risk is associated with “concentration” in the sense that generative AI is likely to be dominated by only two players with a competitor or two in China, and many services will then be built on this basis. ‘IA (..) if a bug appears in this rule, it can poison the whole system. In addition to the third risk related to “regulatory gaps” stemming from the fact that financial regulators seem ill-equipped to understand artificial intelligence.
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