How money managers are using AI to invest
The use of artificial intelligence in finance is fundamentally changing the way money managers build investment strategies and at great speed — but it comes with it’s own set of risks, experts warn.
While the integration of technology in trading has long been established, AI now gives money managers the ability to create codes themselves through data that would have otherwise taken months to gather.
“Right now, there’s a software that can get you all the fundamental, social and technical analysis of 66,000 stocks within seconds. In a firm without AI, that would take an army of analysts,” Jon Najarian, co-owner of Market Rebellion, told BNNBloomberg.ca in an interview on Tuesday.
Najarian argued that this data is invaluable as it informs investment decisions which would have otherwise been impossible to make with this much accuracy and speed.
“I don’t know any active traders at this point who aren’t using artificial intelligence, it’s magical,” he said.
One downside to this technology is the risk of job losses, Najarian acknowledged.
Another expert believes there’s more than just unemployment on the line.
“In a sense, markets move because two people have different positions and outlooks. If AI generated investment strategies all come to the same conclusions, that kills trading,” Bill Blain, market strategist at Shard Capital, said.
Blain also pointed to the possibility of massive market swings should a large amount of money follow only one direction.
“If every retail investor ends up using AI trading systems to inform their strategies – expecting to make easy and imagined cryptocurrency returns, what will likely happen is a very sizeable amount of retail money will be moving in the same direction and this will result in much less market liquidity,” he added.
Sophisticated and institutional investors, however, will stand to benefit, but only to a certain extent, he cautioned.
“No matter how much data an AI collects it will never do more than give a probability of an outcome. Even an AI with a brain the size of a planet can no more see the future than a gypsy crystal ball can,” he said.
“You can never fully trust machine learning as there will always be unanticipated black swan events. This will leave traders who build most of their investment strategies and behaviour from AI driven predictions vulnerable,” Blain noted.
Despite the uncertainty, the efficiency and speed of AI is now integrated into finance and has only begun, Michele Schneider, director of trading education and chief strategist for Marketgauge.com, told BNNBloomberg.ca.
“The biggest impact artificial intelligence is having on money managers is allowing them to work exponentially faster and test out financial models with limitless variables through coding — this is something we’ve never seen before,” she explained.
The trick is, the technology must be asked the right questions to deliver standout results, she added.
"Now that there are endless data points available to work into an investment strategy, the codes will become more complex and the trading landscape will be more competitive, Schneider said.
While the integration of technology in trading has long been established, AI now gives money managers the ability to create codes themselves through data that would have otherwise taken months to gather.
“Right now, there’s a software that can get you all the fundamental, social and technical analysis of 66,000 stocks within seconds. In a firm without AI, that would take an army of analysts,” Jon Najarian, co-owner of Market Rebellion, told BNNBloomberg.ca in an interview on Tuesday.
Najarian argued that this data is invaluable as it informs investment decisions which would have otherwise been impossible to make with this much accuracy and speed.
“I don’t know any active traders at this point who aren’t using artificial intelligence, it’s magical,” he said.
One downside to this technology is the risk of job losses, Najarian acknowledged.
Another expert believes there’s more than just unemployment on the line.
“In a sense, markets move because two people have different positions and outlooks. If AI generated investment strategies all come to the same conclusions, that kills trading,” Bill Blain, market strategist at Shard Capital, said.
Blain also pointed to the possibility of massive market swings should a large amount of money follow only one direction.
“If every retail investor ends up using AI trading systems to inform their strategies – expecting to make easy and imagined cryptocurrency returns, what will likely happen is a very sizeable amount of retail money will be moving in the same direction and this will result in much less market liquidity,” he added.
Sophisticated and institutional investors, however, will stand to benefit, but only to a certain extent, he cautioned.
“No matter how much data an AI collects it will never do more than give a probability of an outcome. Even an AI with a brain the size of a planet can no more see the future than a gypsy crystal ball can,” he said.
“You can never fully trust machine learning as there will always be unanticipated black swan events. This will leave traders who build most of their investment strategies and behaviour from AI driven predictions vulnerable,” Blain noted.
Despite the uncertainty, the efficiency and speed of AI is now integrated into finance and has only begun, Michele Schneider, director of trading education and chief strategist for Marketgauge.com, told BNNBloomberg.ca.
“The biggest impact artificial intelligence is having on money managers is allowing them to work exponentially faster and test out financial models with limitless variables through coding — this is something we’ve never seen before,” she explained.
The trick is, the technology must be asked the right questions to deliver standout results, she added.
"Now that there are endless data points available to work into an investment strategy, the codes will become more complex and the trading landscape will be more competitive, Schneider said.
