ChatGPT Capable of Predicting Stock Market and Interpreting Fed statements
According to two studies, ChatGPT, an AI chatbot, has the capability to predict stock market moves based on corporate news, and it can understand Federal Reserve statements. The first study conducted by the Richmond Fed found that ChatGPT-4 could classify statements from the Fed into five categories, including dovish, mostly dovish, neutral, mostly hawkish, and hawkish, in a way that aligns closely with human readers. ChatGPT outperformed other AI models and matched the designations made by human readers.
The second study conducted by the University of Florida examined ChatGPT's capability to predict stock market moves based on public corporate news. The AI chatbot displayed an excellent ability to predict moves and outperformed traditional sentiment analysis methods.
The researchers wrote, "We use ChatGPT to indicate whether a given headline is good, bad, or irrelevant news for firms' stock prices. We then compute a numerical score and document a positive correlation between these 'ChatGPT scores' and subsequent daily stock market returns." The team added that incorporating AI analysis into trading strategies is likely to become the norm.
It is worth noting that ChatGPT and other similar language model AIs have gained popularity lately, with businesses and individuals exploring their possible use in various sectors.
