Aaron Brown, Columnist

GPT4 Brings Moneyball Logic to Picking Stocks

Large language models could do for investing and economics what sports analytics did for basketball, baseball and football.

June 14, 2024 at 9:00 AM UTC

By Aaron Brown

Aaron Brown is a former head of financial market research at AQR Capital Management. He is also an active crypto investor, and has venture capital investments and advisory ties with crypto firms. He is the author of the soon-to-be-released "Wrong Number."

Is this the future of finance?
Photographer: Kirill Kudryavtsev/AFP

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University of Chicago researchers Alex Kim, Maximilian Muhn and Valeri V. Nikolaev fed OpenAI’s GPT4 large language model the anonymized financial statements of 15,401 public corporations from 1968 to 2021 and asked it to guess future earnings. What they found could eventually have profound implications for finance and the economy even if their immediate utility isn’t very impressive.

The researchers found that GPT4 could predict with 52% accuracy whether next year’s earnings would be up or down — less than human analysts or statistical prediction methods. However, when they used a “chain of thought” technique that tells GPT4 to think like a human financial analyst, accuracy jumped to 60%, better than human analysts and about equal to statistical forecasts.