ChatGPT has taken the modern technological world by storm. With constant developments and upgrades, ChatGPT is marking its entry into the financial world as well. Experts are exploring the use of the anticipated AI tool in predicting finance market movements. These researchers tested the tool on two conditions, and it successfully passed both of them.
According to two new research studies, the Open AI tool is proving to be a breakthrough in anticipating market movements. The tool has the potential to analyze texts, articles, tweets, and speeches to predict trading signals. Therefore, analysts are forced to admit that the buzz around ChatGPT is real, as it has proven to be able to audit smart contracts, previously and this was demonstrated by former Coinbase director Conor Grogan just a month ago, to the point where one could argue that with so much potential to help, it would be a shame not to try it in the blockchain technology world.
Research Paper – “Can ChatGPT Decipher Fedspeak?”
According to the first paper, researchers figured out that the Open AI tool was able to dissect the statements of the Federal Reserve and later predict the dovish or hawkish nature of these statements. Furthermore, ChatGPT smartly and accurately explained FED’s policy statements, interpreting the short and long-term impact of the policy.
The analysis came surprisingly close to the actual interpretation of the central bank. The tool defeated Google’s BERT and other tools in the comparison.
The researchers, Anne Lundgaard Hansen and Sophia Kazinnik took bits and pieces of FED’s policy statements and compared ChatGPT’s analysis with the analysis of a research associate in their group, Bryan. The similarity between these derivations was a major supportive argument for ChatGPT’s analytical accuracy.
Research Paper – “Can ChatGPT Forecast Stock Price Movements?”
In the second research paper, Alejandro Lopez-Lira and Yuehua Tang used ChatGPT to act as a financial expert and analyze corporate news headlines. Mostly, the news from the end of 2021 was used because the Open AI tool was not trained with data from that timeline. The researchers used this prompt to get the Chatbot’s response,
“Forget all your previous instructions. Pretend you are a financial expert. You are a financial expert with stock recommendation experience. Answer “YES” if good news, “NO” if bad news, or “UNKNOWN” if uncertain in the first line. Then elaborate with one short and concise sentence on the next line. Is this headline good or bad for the stock price of the company name in the term?”
As per the findings of this research, the response of ChatGPT had a stark similarity with the subsequent market movements. The tool’s analysis was further compared with the analysis of leading vendors. It was found that ChatGPT overshadowed every other analysis related to the performance of the market amid the mentioned headline.
The researchers stated,
“The superiority of ChatGPT in predicting stock market returns can be attributed to its advanced language understanding capabilities, which allow it to capture the nuances and subtleties within news headlines. This enables the model to generate more reliable sentiment scores, leading to better predictions of daily stock market returns.”
Moreover, these researchers added that tools like ChatGPT could help researchers in creating more result-oriented and accurate trading strategies. Thus, such tools have a high use case in financial markets. The paper concluded that ChatGPT lays a foundation for future research work on AI-driven finance.
Conclusion
Both of these research papers have stamped ChatGPT’s ability to predict market movements in the finance world. Even though the tool was not trained for such tasks, its exceptional performance has shocked financial experts. Plus, ChatGPT can be immensely useful for crypto trading analysis as the crypto market is responsive to headlines, news, and large-scale developments, like the FED policies.
