Artificial Intelligence | 25 September, 2018

What benefits does artificial intelligence have for the investor?

David Requena Third Party Products

Artificial Intelligence is making strides as a disruptive element in many areas of our daily lives, or at least, as a tool that simplifies and improves many of our habitual processes. We analyze what benefits this impressive technology has for the investor.

Translating a text, unlocking a phone through facial recognition or the appearance of self-driving cars are some clear examples of tasks that are associated to human intelligence and are now being done by computerised systems capable of synthesising, ordering and taking intelligent decisions.

This article analyses the potential impact of AI for small investors in financial markets and its benefits when investing:

 

  • Identifying new investment opportunities

The analysis of a multitude of data sources with advanced computing tools allows the detection of new patterns of behaviour in the financial markets.
In the same way as the big technology companies use our Internet searches to recommend films, hotels, books or trips we might like, by analysing the largest number of variables it is possible to identify with great precision the market’s feeling about a particular asset or a company’s or sector’s financial results in order to take a position based on that information.

  • More accurate risk analysis

By using improved algorithms that are better parameterised and capable of learning from new data ‘machine learning‘, new investment opportunities can be detected with a better risk-return binomial for each client.
So for example we can predict bankruptcies in companies where we are investing, regulatory events that may have an impact on the sector, or future mergers and acquisitions that could have a significant effect on the share price.

  • Eliminating biases when investing

The objective use of data and their conclusions eliminates the emotional and psychological biases that all humans have when investing, and which lead us to make hasty and not necessarily wise decisions. (Rendon article)

 

  • Current trends

So far we have referred to AI as a useful tool for investing. However, as published by CNBC in October last year, there are already products governed exclusively by the principles of artificial intelligence and machine learning. Today we only have one year of history to analyse, but the balance is positive:


Conclusion:

In short, we could say that artificial intelligence has ceased to be the future for the world of investment and is now the present for many investors seeking to eliminate emotional biases such as the famous ‘anchoring effect‘ or ‘flock effect‘, and to avoid ‘sanctions for companies‘, as occurred in the automobile sector in 2015.