"HOW HAS THE IMPLEMENTATION OF AI-DRIVEN ALGORITHMS IMPROVED THE ACCURACY OF FINANCIAL FORECASTING MODELS AND ENHANCED THE PERFORMANCE OF INVESTMENT STRATEGIES IN THE STOCK MARKET OVER THE PAST FIVE YEARS?"
DOI:
https://doi.org/10.53555/eijbms.v11i1.213Keywords:
AI, financial forecasting, traditionalAbstract
AI has been a game changer in the financial world, especially with regard to prediction and investment strategies. Algorithms driven by AI over the past 5 years have improved decision making, data handling and predictions. Manual calculation based forecasting using historical data would not be able to address the complexities and rapid changes of the market. But with machine learning and deep learning, AI has really made an impact using really big data, globally including market sentiment at speeds and accuracy never before possible.
AI investment in the financial industry amounted to 35 billion by 2023, with 21 billion of this amount being funded by banks. Thousands of financial reports are monitored in real time by AI tools like BlackRock’s Aladdin platform and provide actionable insights for proactive decisions and risk management. AI also enhances portfolio management and algorithmic trading systems, delivers more reliable forecasts of the future and investment strategies that better withstand economic shocks. And, it turns out that those built on AI can perform better than those built on foundries, to put it another way.
There are many other challenges including but not limited to data quality, model transparency and ethical concerns. AI models like any other models are only as good as the data they are fed with. The competitive nature of these algorithms makes it hard to be accountable to identify if the algorithms are indeed fair. But these challenges must be met as AI continues to shape the future of financial forecasts and investment strategies.
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