ProjectBlog: Can AI and automated trading predict stock market with 100% accuracy? –

Blog: Can AI and automated trading predict stock market with 100% accuracy? –

The difference between machine and human predictions is already pretty blurry (picture: Paramount/

If you’re one for an emotion-based rollercoaster then look no further than the stock market.

The ups and downs of the many forces at play on share prices have made it impossible to predict, at least for now.

Over the last few years, the decision making process about what to invest in and when has increasingly been taken on by artificial intelligence (AI).

One company has even taken decision-making entirely out of human hands, launching a hedge fund making all stock trades using AI without any human intervention.

Aidiya, a Hong Kong based AI company generated a 2% return on an undisclosed amount in a day. While a short sample, that’s well above the market average.

‘If we all die, it would keep trading,’ Aidyia’s chief scientist Ben Goertzel told Wired.

The algorithmic trading market was valued at $9.3m (£7.2m) in 2017 and is projected to grow by over 10% annually.

And algorithms have had success.

In 2008, when the financial meltdown happened, the Dow Jones index lost around 50% of its value in 18 months.

In that year, an AI model devised by researchers returned 681% on investment. Over 13 years from 1992 to 2015, that study led by Dr Christopher Krauss averaged a return of 73% a year compared to an annual market growth of 9%.

So why aren’t the machines being left to run the stock market?

‘Stock markets have been using automation and machine learning for at least a decade now,’ Devina Paul, founding partner of Galvanise Capital, tells

‘Some kind of high skilled human intervention has been and will always be required.’

This is said to come down to the ‘chaos’ of the markets and that self-fulfilling prophecies alongside all sorts of unquantifiable factors make human emotion and sentiment – a key ingredient to stock fluctuations – impossible to predict.

There are two types of chaos: level one and level two.

Level one chaotic systems are those which don’t react to predictions – the weather for example – and level two are those which do react to predictions, like politics, public protests and, of course, the stock market.

Does that mean that machines will eventually get to the bottom of the weather forecast but never the FTSE index?

‘Algorithms have turned out to be particularly effective at such times of high volatility [as in 2008], when emotions are dominating the markets,’ study leader Dr Krauss, of Friedrich-Alexander-Universität Erlangen-Nürnberg in Germany, has said.

Source: “artificial intelligence” – Google News

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