AI can pick stocks better than you can

EVERYONE who works in an information industry – a category that includes journalists, software coders and stock pickers – should be thinking about whether, or perhaps when, a computer is going to take their job. 

A large language model (LLM), trained on the writing done for the Financial Times, could write newsletters that sounded a lot like me. Maybe the letters would not be quite convincing today, but it likely won’t be long before they are. Perhaps people don’t want to read newsletters written by LLMs, in which case my trip to the knacker’s yard is not quite booked. But the threat is clear.

Readers may be less interested in the future of journalism than that of analysts and portfolio managers. Which brings me to a recent paper by three scholars at the University of Chicago school of business, Alex Kim, Maximilian Muhn and Valeri Nikolaev (I’ll call them KMN). The paper, Financial Statement Analysis with Large Language Models, puts ChatGPT to work on financial statements.