Artificial intelligence (AI) technology, much like the internet, electricity, internal combustion and steam power before it, is spurring a transformation in the global economy. The impact on investment strategy and automated trading technology is just beginning to be felt.
The pressure for asset managers to outperform the market consistently has always been a constant, but against a backdrop of financial market uncertainty and more stringent regulation, it is getting harder and harder to do.
With this in mind, the buy-side has turned to AI to improve investment decision making. Investment firms, particularly hedge funds, are amassing huge amounts of so-called ‘alternative data’ to help them make better investment decisions and improve asset allocation.
Funds are using AI to make sense of, and find patterns in, this unprecedented volume of information. In fact, due to the amount and types of data available some are completely changing their model and adopting a ‘Big Data’ investment framework.
Previously, a quantitative investor would have been limited to analysing traditional data sets like regulatory filings, financial statements, trading economics and global macro data. There is now the opportunity to harness a much broader range of market-relevant information in real time with the use of sophisticated AI tools, such as machine learning to analyse that large quantity of data efficiently and effectively.
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