ChatGPT, an artificial intelligence chatbot developed by OpenAI, has passed two new academic tests in finance with flying colors. In one paper, two researchers from the Federal Reserve found that ChatGPT came closest to humans in deciphering whether central bank statements were dovish or hawkish. In another, researchers prompted ChatGPT to act as a financial expert and interpret corporate news headlines. The study found that the answers given by ChatGPT showed a statistical link to the stock’s subsequent moves, suggesting that the tech was able to correctly parse the implications of the news. The findings suggest that ChatGPT could be a major step forward in the use of technology to turn text into trading signals.

Key points:

• Two academic papers have found that ChatGPT, an AI chatbot developed by OpenAI, can decode “Fed Speak” and forecast stock price movements
• Researchers at the Federal Reserve found that ChatGPT was the best model in figuring out if the central bank’s statements were dovish or hawkish
• ChatGPT was even able to explain its classifications of Fed policy statements in a way that resembled the central bank’s own analyst
• Researchers at the University of Florida found that ChatGPT was able to correctly interpret corporate news headlines and showed a statistical link to the stock’s subsequent moves
• The findings suggest that ChatGPT could be a major step forward in the use of technology to turn text into trading signals

Inspired by:
Lee, Justina. “ChatGPT Can Decode Fed Speak, Predict Stock Moves From Headlines“. Bloomberg, April 17, 2023,

Sources
Hansen, Anne Lundgaard and Kazinnik, Sophia, Can ChatGPT Decipher Fedspeak? (March 24, 2023). Available at SSRN: https://ssrn.com/abstract=4399406 or http://dx.doi.org/10.2139/ssrn.4399406

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