Can ChatGPT Forecast Stock Price Movements? You Might Be Surprised!

The usage of Large Language Models like ChatGPT is exploding and with new applications emerging every day, the burning question on investors' minds is whether these models can enhance their returns. In this video, we'll dive into a recent research paper that examines the use of these models for forecasting stock returns, and the surprising results it uncovered. Additionally, we'll consider the practical implications of this research and whether it can be applied to our own investment portfolios.
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Timestamps
00:00 Introduction
00:41 Sentiment Analysis
01:14 Models
02:52 Prompts
04:20 Sentiment Analysis With LLMs
08:29 Performance
13:27 Can I Make Money With This?
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DISCLAIMER
All information is given for educational purposes and is not financial advice. Ramin does not provide recommendations and is not responsible for investment actions taken by viewers. Figures that are quoted refer to the past and past performance is not a reliable indicator of future results.

[@timetraveller3063]

Excellent content. I have been using ChatGPT to predict investment returns for funds, feeding in information on broker and fund costs. I prompt ChatGPT by asking it to be 'hypothetical' or 'pretend your a financial advisor'. Great fun!

[@simonjonesptchester]

Interesting and helpful video, as always; thanks, Ramin!

[@Pensioncraft]

You're welcome @Simon Jones

[@stevo728822]

Yes, people were paid to provide an answer to a question. In the future, people will be paid to provide the question.

[@Annamacko988]

Thanks so much for sharing this amazing video

[@AshMati-]

I currently invested in stocks with the help of Bit-Astro

[@Maryparmker]

i highly recommend Bit-Astro. have seen them on the news they are legit

[@andrewmarsden1970]

Ramin, would be useful see your analysis on inverted ETFs. I think they are an interesting option if a recession bites and finacial markets fall. Thanks.

[@pathologicaldoubt]

Saw the reports on this, thanks for doing a deep dive with more details

[@Pensioncraft]

Glad you liked it @pathologicaldoubt

[@avibm948]

Great video Ramin. My thoughts on this: it will be adopted quickly by hedge funds and financial institutions which already account for most of the trading volumes. The old martingale pricing theorem and market efficiency theorem still holds. If there is a room for statistical arbitrage based on AI sentiment analysis the market price and broker spread will reflect it instantly. It's more interesting to try to predict the medium term price using companies reports and predict short or long term returns using company reports , sentiment analysis from news and social media, company marketing campaigns. Eventual AI algo trading will be widely used the market will be even more efficient than today. The returns you displayed will be closer to 0 taking into account broker spreads and fees if not included in their model.

[@teddybar66]

Huh, I'm not a fan of ETFs but I definitely see your point. I wonder if Kathy woods (ARKK, ARKF) would use this. I'm guessing yes. But..... but....

[@Az0rx]

If only the market efficiency theory was true

[@amcluesent]

I agree, this is already in the price and all the large investment house will have trained their own LLMs with 'secret sauces'. Sentiment analysis also feel like navigating a ship by looking over the stern.

[@SchvarczFranco]

I didn't watch the entire video yet, but congrats! You are getting the KZbin Spirit to boost your channel and pass some information in the process!

[@goober-ll1wx]

It's a Moloch system, he's just doing what they all do in the end in the desperate quest for eyeballs on phones... 🙄

[@Pensioncraft]

Thanks @Guilherme Schvarcz Franco

[@mlguy8376]

You can control FPR by using the actual probabilities of the classification of YeS or No. you are looking for a low FPR and similarly low FNR (for classifying BAD)

[@toddnedd2138]

Thanks for the video. Bloomberg has released BloombergGPT in April, trained on financial data, e.g. for sentiment analysis. my guess, to access and use this model you have to be a big financial investor. So, bad news for retail traders :/

[@ciaoatutti11111111]

How did your momentum competition ho on stock card?

[@agracian1]

Hi Ramin, did you use the free version of Chat GPT 3.5, or the plus paid version? Using the free version I get the response to exactly the same prompt as: "UNKNOWN It's unclear how much impact the fine will have on Oracle's stock price in the short term, as the case was against Rimini Street, not Oracle directly."

[@petergorian535]

Thanks fascinating was wondering how AI was going to be deployed in the marketplace.....computerised trading disasters can be expected...we should some trading halts on a regular basis in the near term.

[@mbg9650]

Is Citadel results showing the best way to trade?

[@jonb5135]

Very interesting video. Is it me or is "'Look at the description in the link below" the wrong way round? 😂

[@teddybar66]

Total game changer. My hunches no longer have value. An ETF with a lot of parameters would be my best investment. Maybe I need something more analog like a rental for reliable returns and hope for real estate increase in market value.

[@michaelcaldwell3709]

Really interesting

[@Pensioncraft]

Thank you! @Michael Caldwell

[@davidfraser1966]

Not sure what to make of all this. I think you’re quite right and retail investors will (as usual) be squeezed out by the big boys so medium term trades are probably a better bet. Good and informative content as ever!

[@Pensioncraft]

Thaksnks @David Fraser

[@andrewl1556]

Great video. AI will revolutionise trading, no doubt. However, for an individual to implement this strategy, it would require a trade to be placed AFTER the news was publically known and then assessed by an AI model. By that time, they would have missed the majority of the price move and could have bought too high or sold too low. This point must/might have been covered by the researchers?

[@andrewmarsden1970]

Thanks Ramin. I was unclear on Chat GPT.

[@Pensioncraft]

You're welcome @Andrew Marsden

[@pauls3075]

OK 2 things: Firstly finance 'news' sites regularly put out opposite stories on the same day for the same piece of news. "how to prepare for the recession" and "why the markets wont crash" type. This is the Garbage In Garbage Out principle. Secondly if this IS going to work YOU need to look for another vocation because it will make you redundant. Textile workers cheering for the introduction of looms...

[@wellthatsokay8582]

We honestly don’t know. In the 60’s and 70’s they imagined us living in sky cities or zipping through the air in spaceships 🚀 to visit extended family. And here we are shelling each other on the Eastern Front again.

[@pauls3075]

@@wellthatsokay8582 How's that AI bot coming along.

[@crassusofrome6386]

They should have been cheering them on as you can see per capita wealth and life quality has increased exponentially since then.

[@lucashowell8689]

Yeah this plan is BIGLY going to fail

[@IncomeBoost42]

I just used ChatGPT to test its personal finance knowledge (credit card debt advice) and it was pretty good. There was a difference between GPT3.5 and GPT4. Ironically, GPT3 was much more concise whereas GPT4 was slower and elaborated a bit too much at times.

[@jondoe4160]

I think if left with more of the choices in market trading, AI will increase the speed of trades, therefore the speed of the market and in some cases create crashes. So as a trend starts, for instance a sell on a stock, AI will sell before the price drops too far as it can see the potential for a drop, this increases the drop and its acceleration. Maybe that is like investor super fear? In the same way an increase in price might make a stock take off, then do we get a gradual correction... A stock that has tanked will have gone too far, so a buying strategy could be to buy that tanked stock. Then, does the AI discover this before I have written this? I am uneducated in this field, so I would be interested in being corrected!

[@steves7973]

I guess it all depends on the quality of the data supplied to the application.

[@ashketchum4953]

That trend line at 2:45 is extremely generous. That's not a good fit at all.

[@carleynorthcoast1915]

ChatGTP does not have access to current or historical market data

[@jayhay1237]

We need to employ AI to examine AI?

[@XORTION]

Any stocks to get into guys RE AI ?👍 fellow investors ❤️

[@teddybar66]

An ETF type for REITs if thay use gpt I'm guessing but are their parameters on point.

[@lucashowell8689]

You’re going to enter an echo chamber and you’re guaranteed to be the last person out of the theater

[@paul_k_7351]

Surely also trading is doing this already? They are wrong footed all the time and ironically probably provide MORE opportunity for arbitrage rather than less. The recent news on Tesla was a case in point, markets did nothing for a few hours before they realised that slashing revenue will hit the company’s matings and then it went down 10%.

[@hTyKn1]

Just buy a global index and go to sleep ignoring all the news 😁

[@djayjp]

Better to use Bing as that's based on GPT4, whereas ChatGPT is the 3rd version. Unfortunately GPT4 isn't open source like the third version, so researchers can't really use the fourth version.

[@DaystarHiker]

"NO The headline of Rimini Street being fined $630,000 in a case against Oracle could be perceived as negative news for Oracle's stock price in the short term, as it may indicate legal challenges and potential financial impact on the company."

[@ldandco]

Two key questions: Can it be backtested ? If so, is it profitable ? Otherwise, model is rubbish

[@slainye]

I wonder how vulnerable this makes it to misinformation/disinformation which could cause selloffs....

[@jasonreviews]

i tried. didn't work. i coded in python many times.

[@yara7405]

did you finetune chatgpt to predict it using sentiment analysis or? I'm interested in researching this but want to know if its even worth it based on your experience?

[@GameOn444s]

Nothing can beat inside trading like Nancy.

[@harmgregory4560]

Or not.

[@charlesjohnson4442]

God I hope someone models AI software based on r/Wallstreetbets… honestly, hours of entertainment.

[@lucashowell8689]

Crash and burn investing for dummies

[@ErikDJ123]

ChatGPT can't even do first grade arithmetic. It is just a fancy parrot that has been hanging out with investment bankers.