A recent Harvard Business School study shows that artificial intelligence can predict about 71% of mutual fund managers’ trade decisions, sparking concern about AI’s growing role in finance. This new research analyzed trading data from 1990 to 2023 and found that managers with longer trading histories and those in less competitive sectors have more predictable trades, sometimes nearly all trades in a quarter. Interestingly, managers with larger ownership stakes tend to be less predictable and outperform their peers, while predictable managers underperform. This indicates that while AI may replicate many trades, the more unpredictable trades tend to yield better results. The study highlights the potential for AI to automate certain financial tasks, impacting an asset management industry valued at approximately $54 trillion.
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