According to finance professor Alejandro Lopez-Lira, large language models like ChatGPT could be used to forecast stock prices.
, it's an intriguing use of the tech that could potentially have some pretty substantial economic implications.that around 35 percent of financial jobs are already on the chopping block due to AI.Predictable Returnspaper, Lopez-Lira found that ChatGPT was able to predict the direction of stock prices well enough to make a difference in returns just by parsing financial headlines.
"The fact that ChatGPT is understanding information meant for humans almost guarantees if the market doesn’t respond perfectly, that there will be return predictability," Lopez-Lira toldBut there are plenty of limitations to the professor's experiment. For one, ChatGPT never actually analyzed target prices or did any calculations.
"As more and more people use these type of tools, the markets are going to become more efficient, so you would expect return predictability to decline," he told. "So my guess is, if I run this exercise, in the next five years, by the year five, there will be zero return predictability."
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