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Is Artificial Intelligence taking over Wall Street trading?
Wall street
Wall Street, the pinnacle of finance, has always been a place of human skill and intuition. However, with the introduction of Artificial Intelligence (AI), the dynamics are evolving. Will traders soon be obsolent?
The facts
Machines and algorithms, free of emotions, are making their way into trading, promising faster, more accurate judgements.
Human emotions are a major element in trading decisions. Fear, greed, and even excitement can impair judgement. Machines, on the other hand, are based entirely on logic. They can quickly analyse large amounts of data and make transactions free of emotional bias.
AI-powered algorithms process a variety of data sources, including price fluctuations, macroeconomic indicators, news items, and corporate data.
To anticipate market patterns and individual stock values, techniques such as Linear Regression and Support Vector Regression are applied to historical data.
The arguments
With over 6000 companies registered on the New York Stock Exchange, evaluating the entire market manually is nearly impossible. When it comes to big data, AI searches regulatory filings, social media, news feeds, and financial measures to find cheap assets.
Institutional traders, particularly hedge funds, are becoming more reliant on AI-powered trading tools. These computers identify minute changes and previous patterns, and they execute hundreds of trades per day automatically.
A real-life example
An intriguing case concerns actress Anne Hathaway and Berkshire Hathaway stock. When Anne Hathaway was mentioned in the press, Berkshire Hathaway’s stock price rose. This was most likely due to an algorithm responding to her name. This example is a false positive, but experts say it demonstrates AI’s capacity to respond to real-time input.
Generative AI on Wall Street
Generative AI, which is capable of creating and analysing fresh data, has made its way to Wall Street. Investment banks are aggressively adopting this technology, which has the potential to replace traditional functions. AI is not just supplementing, but also replacing human workers in areas such as data analysis and decision-making.
AI is rapidly transforming Wall Street trading by enabling fast, accurate, and dispassionate decision-making. As AI advances, its position in finance will only grow, changing how we view and interact with the stock market. The question is not if AI will take over Wall Street trade, but rather how well humans can adapt to this new reality.
