ChatGPT is the latest technological breakthrough that has been transforming various fields, including IT and education. The technology developer OpenAI has recently said that it would offer up to $20,000 to users reporting vulnerabilities in its artificial intelligence systems. Alejandro Lopez-Lira, a finance professor at the University of Florida, has found that the large language model may be useful to forecast stock prices in the financial market, a report by CNBC said

The professor, in his unreviewed research paper, has said that he found the ChatGpt’s ability to predict the direction of next day’s stock returns were much better than random.

The research emphasised that the integration of advanced language models into investment decisions could yield more accurate predictions and enhance the performance of quantitative trading strategies. 

The professor, along with his partner Yuehua Tang, looked at over 50,000 headlines from a data vendor about public stocks on the New York Stock Exchange, Nasdaq, and a small-cap exchange, starting October 2022. They fed the data into ChatGPT 3.5 with an instruction — “Pretend you are a financial expert. You are a financial expert with stock recommendation experience. Answer “YES” if good news, “NO” if bad news, or “UNKNOWN” if uncertain in the first line.”

They found that the technology performed well in nearly all cases after being informed by a news headline. “The fact that ChatGPT is understanding information meant for humans almost guarantees if the market does not respond perfectly, that there will be return predictability,” Lopez-Lira told CNBC.