The Role of Artificial Intelligence in Investing
Artificial Intelligence is a branch in computer science that focuses on making “smart” machines, with the ultimate goal of them being able to perform tasks that would require some form of human input or thinking. Even though firms haven’t been able to achieve true artificial intelligence, lesser forms of it have been applied throughout the world; from the smart assistant on your smartphone to self-driving cars. Another such application that is increasing in popularity is the use of AI in the field of investing.
The investing process has been disrupted and changed drastically by new technologies in the past years. Specifically, the core of the field has changed from being built on relationships and an affluent activity to a more democratised, free, and inclusive field open to the general population. A large chunk of this change can be accredited to the adaptation of AI in investing.
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How has AI influenced investing?
“Investing is the ultimate numbers game, and smart number crunchers tend to be good at it,” said Daniel Seiler, head of the Multi-Asset Boutique at Vontobel Asset Management. So, the ability for AI to absorb and process numbers faster than a human would otherwise be able to, makes it a valuable asset in the field. This task is taken on by machine learning, a branch of AI, which uses algorithms and statistical models to analyze patterns in data. An example of this is Robo Advisor, the Fintech technology advisor to general investors for online investment. By analysing patterns and data, Robo Advisor is able to give advice on wealth and investment management, as well as financial planning.
Almost 90% of the trades made by hedge funds are done by hard-coded computers; however, these are not the same as AI as they are not capable of learning from the analysis of data (deep learning) and companies such as MAN AHL are moving towards trying to adapt AI to making investments for clients. A study conducted on the intelligent machines used by MAN AHL found that their AI could allocate trade tasks much more efficiently than if this process were to be done manually, saving the firm time and money.
All in all, artificial intelligence is still incubating in the field of investment: there is limited use of it in firms. However, with the advantages outlined above, it makes for a promising technology to be integrated into the investing field.
Written by Dhruv Kothari
Edited by Amanda Y