How can investors benefit from AI technologies?

The rapid development of various technologies and applications of artificial intelligence may or may not be side-by-side with the human element, in light of the widespread employment of these applications in various fields.

In this context, the financial and investment sector is not far from those rapid changes, the role that technology plays in this sector, especially in technical and financial analysis, therefore the role that modern applications play and can play in the future, in bringing a revolution in the world of finance and business, it is the small investor and big and big companies. and affect countries’ economies.

One of the questions that arise in this context is the extent to which these applications can be used in determining the investment trends of individuals, the extent of their effectiveness in providing real investment advice instead of a financial advisor, and how feasible these are. Are technologies used and benefited in proper management of funds? and other questions.

Capitalizing on this momentum, financial institutions are seeking to expand their reliance on these technologies and offer new applications based on them.

For example, JP Morgan, one of the largest and most famous US banks, is looking to use AI applications. As a first attempt in this context, according to “CNBC”, the bank is adopting a software program (somewhat similar) to advise investors. ChatGPT) helps clients choose the most suitable investment through an application under development called IndexGPT.

Evidence Hopeless

In an exclusive report for “Sky News Arabia Economy”, says Professor Nicolas Gradojevet of the Department of Economics and Finance at the Canadian University of Guelph, whose research interests (artificial intelligence and big data analytics) include:

• Free AI chatbot services like ChatGPT are still “incredible” to make any fair and reliable investment decision.
• Accordingly, investors should seek professional services that use specialized AI tools in their analyses.

He points out that while investment banks and hedge funds have been using artificial intelligence in their business practices for at least 25 years, one of the main applications of artificial intelligence in investing is arbitrage trading (buying and selling an asset at the same time to take advantage of price differences in different markets or in different formats), while AI can leverage different assets. Predicts or detects pricing errors in classes, resulting in profitable, nearly risk-free trading.

In addition, rapid AI-based “algorithmic trading” systems can use “technical indicators” (i.e. price signals based on historical price or recurring volume patterns) that can lead to significant profits for investors.

“Artificial intelligence can analyze large datasets containing macroeconomic and corporate information and make stock or bond recommendations tailored to investors’ overall portfolio objectives and risk appetite,” he asserts.

Practical experience

Relying on “trusted” firms for AI investment advice is seen as the “best option” so that clients don’t have to search for options themselves that can fall into the trap of bad advice.

So far, an application like ChatGPT does not provide direct advice on investing in specific stocks, for example, through practical experience, and when the “Sky News Arabia Economy” application asked a question about investing in specific stocks, the answer came. as follows:

“Sorry, but I cannot directly recommend investing in a particular stock or any other stock.. Please understand, because I am an AI language model and I do not have the ability to make financial or investment recommendations. ..you may be interested in investing in this stock or any stock. If any, it is necessary to carry out necessary research and consult a professional financial advisor before taking any decision.Global events that may affect the company and its sector and market performance.

The same reply added: “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 able to bear those risks.. Again I apologize but I cannot be a reliable source of recommendations.” Investment”.

Financial management

In a related context, a professor in the Department of Economics and Finance at the Canadian University of Guelph asked “How can artificial intelligence help people manage their money?” talking about

• AI can study people’s consumption patterns and suggest how they can optimize their budgets and save money.
• Artificial intelligence is also used in risk management by banks to detect fraud.
• This allows banks to track and manage any identity or credit card theft. Any time AI detects suspicious and unusual transactions, it will alert the bank and/or customer, preventing potential fraudulent transactions.
• Artificial intelligence is also widely used in credit risk management for both companies and individuals.

He points out that an important advantage of AI is the ability to process large amounts of data and categorize information into multiple datasets. 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, AI can determine the appropriate interest rate to be offered to the customer.
• All these applications of AI lead to better allocation of resources (i.e. money) and a more efficient economy.

SCIENTIFIC RECOMMENDATIONS .. and “NO GUARANTEED” PROFITS

For his part, Mohammed Saeed, Chairman of the Board of Directors of “IDT” Consulting and Systems Company, in exclusive reports to “Economy Sky News Arabia”, “Artificial intelligence applications can be used to a certain extent in the stock market, by finding the best strategies.” Investment based on available databases, including history of stock movement and future expectations accordingly.

But on the other hand, “this is not necessary to ensure the realization of gains,” according to Saeed, who notes that “the movement of stocks follows other rules in addition to scientific evaluations based on data. Among those rules are sudden market influencing factors and decisions and even investor sentiments.” Developments and events related to companies.

He adds, “If you need precise scientific frameworks to determine the future direction of a stock, artificial intelligence can help you, but it is not sure to guarantee a profit,” “The rise of artificial intelligence has improved the performance of many investors who suffer from scientific barriers to trading in the stock market.

On the other hand, the technical expert points out that companies and financial advisors use artificial intelligence technologies to identify important trends for their clients, and in recent years several methods have appeared that have greatly improved that trend as long as there is interest in the presence. Fields of Artificial Intelligence in Enterprises

3 Risks

A 2020 article on AI by Lily Bailey and Gary Gensler argued that AI, while creating enormous benefits for financial regulators in providing their financial analyses, creates three significant stability risks. Chief among these is the “obviousness” that AI tools are opaque to everyone but their creators. This could be remedied by asking them to publish their internal guidelines in a standardized manner, but that is unlikely to happen anytime soon.

The second such risk is related to “concentration”, which means that the AI ​​that can be developed in China with a competitor or two will be dominated by only two players, and many services will be built on that AI platform (..) A bug appears in that rule that poisons the whole system. In addition to a third risk related to “regulatory gaps,” financial regulators appear ill-equipped to understand artificial intelligence.