The Role of AI in Financial Markets: Impacts on Trading, Portfolio Management, and Price Prediction

Abstract

Today artificial intelligence (AI) has become an indispensable assistance for human traders. AI systems provide human traders with numerous advantages, such as the capability to conduct genuine high-frequency trading (HFT), which capitalizes on price discrepancies and market anomalies, and to analyze a massive data set from multiple sources in a fraction of a second. The main goal of this research is to examine the role that AI plays in the financial markets, with an emphasis on how it affects trading, portfolio management, and price prediction. In this study, quantitative research methodology was utilised. Primary and secondary sources of data were used in the investigation. An online questionnaire was used to collect the primary data, and finance databases, pertinent industry bulletins, and already published literature were used to collect the secondary data. It was found that there is an increasing incorporation of AI and machine learning technologies into financial institutions. Many of the participants revealed that these technologies are used moderately to significantly in their organizations. The most prominent AI and machine learning applications are “algorithmic trading, risk management, fraud detection, credit scoring, and customer service”.