The Role of Artificial Intelligence in Shaping Modern Investment Tactics
Author : Prajwal Kiran Bagewadi and Dr. Parul Tandan
Abstract :
The rapid growth of Artificial Intelligence (AI) and Machine Learning (ML) has greatly impacted the financial services industry, particularly in the area of investment strategies. The AI revolution drives data-driven decisions, automates complicated financial analyses, and increases the accuracy of forecasts. As a result, we are now able to develop more effective and adaptable investment models. This paper highlights the various implications of AI and ML on investment strategies, including but not limited to portfolio optimization, risk management, algorithmic trading, and financial forecasts. For example, AI trading algorithms based on ML techniques can analyze large amounts of structured and unstructured financial information, identifying previously hidden patterns and market anomalies that traditional methods may have missed. Additionally, deep learning and reinforcement learning methods improve investment strategies by continuously learning from changing market conditions, and simultaneously updating and adjusting investment actions. Furthermore, AI-enabled robo-advisors have democratized investment strategies, giving retail investors personalized portfolio advice, while also lowering operational costs. Besides improving decision-making, AI & ML are critical to risk assessment as they use sentiment analysis, alternative data, and predictive models to identify potential market downturns and vulnerabilities in assets. Hedge funds and institutional investors are starting to depend more on AI-based insights to redeploy and allocate their assets. They’re also using them in tests that simulate asset vulnerabilities in times of stress and otherwise to reduce the financial distress we see in the financial crisis. Risks include data bias, regulatory issues arising from the use of AI, and ethical issues related to AI-based trading. All of this suggests that a balanced approach to the use of AI in financial markets is warranted. This study examines the promise of AI and ML for investment purposes and the hurdles as well. It is an interesting time as AI and ML technologies becoming more standard in the marketplace. AI-based models have performed exceptionally well in designated market conditions but having human experts still offers value in terms of deciphering complex signals in the market and to stay within the bounds of regulatory guidelines.
Keywords :
Artificial Intelligence, Machine Learning, Sentiment Analysis, Predictive Analytics, Robo-Advisors.
