Will ChatGPT be your next fund manager?
Dummy AI Stocks
A dummy portfolio of stocks picked by ChatGPT outperformed the S&P 500 Index — a list of the 500 most valuable companies in the US — over a span of eight weeks, financial comparison site Finder.com found.
The portfolio gained a considerable 4.9 percent between March 6 and April 28, compared to an average loss of 0.8 percent of the ten leading investment funds in the UK over the same period.
In comparison, the S&P 500 rose only three percent.
While those numbers are impressive on the face of it, they obviously don’t tell the whole story. For one, the time period being measured is quite short, and the experiment is anecdotal. We also don’t know what the numbers would look like if a portfolio was chosen at random. After all, with enough guesses, anyone could eventually outperform the S&P 500.
Given the nature of the tech, we’ll also never know how exactly the chatbot arrived at its answer. Besides, the tech is still struggling with far more mundane tasks like reliably telling the truth or basic arithmetic.
In other words, there’s a good reason why ChatGPT refuses to “provide specific investment advice” when prompted. Still, though, the results are intriguing — and could be a harbinger of controversial new frontiers in the public’s use of OpenAI’s tech.
AI Gains
Analysts at Finder asked OpenAI’s mega-popular AI chatbot to select stocks based on a common set of criteria, including levels of debt and historical growth.
ChatGPT chose name-brand stocks like Microsoft — a major backer of its creator OpenAI, for those keeping score — as well as Netflix and Walmart for its portfolio.
It won’t “be long until large numbers of consumers try to use [ChatGPT] for financial gain,” Finder CEO Jon Ostler said in a statement quoted by CNN.
The news comes after University of Florida finance professor Alejandro Lopez-Lira shared a yet-to-be-peer-reviewed paper last month in which he claimed that ChatGPT was able to forecast stock prices of specific companies by parsing financial headlines.
But as Lopez-Lira told CNBC a the time, if these tools really are effective and everybody starts making use of them, any gains made would diminish significantly over time as the market adjusts.
“So my guess is, if I run this exercise, in the next five years, by the year five, there will be zero return predictability,” he said.
Finder’s ChatGPT stock portfolio would likely suffer the same fate. After all, the predictability of the stock market could diminish if investors were to make use of the same algorithms.
And before then, it’s probably best to refrain from using ChatGPT to make financial decisions unless you have an exceptional tolerance for risk.
Ostler told CNN that investors should speak to a human advisor instead for now, but argued that “the democratization of AI seems to be something that will disrupt and revolutionize financial industries.”
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