The Korean Economic Forum
Artificial Intelligence and Financial Investment Strategy
Hyoung-Goo Kang (Hanyang University), Kyounghun Bae (Hanyang University) and Bonha Koo (Dongguk University)Year 2019Vol. 12No. 3
Abstract
Artificial intelligence(AI) can create great value in both intra-day andlong-term investments. In intra-day investment, complex information needs tobe processed quickly. Here AI easily dominates humans. In mid- to long-terminvestments, individual investors generally make behavioral biases. AI candiagnose and overcome behavioral errors by rule-based decision making. Inaddition, it can contribute to mid- to long-term investment by continuouslyupdating academic research and the latest financial products. However, mostAI-based funds, such as RoboAdvisors, use daily data to focus on tactical assetmanagement. This is one of the most abused areas of AI. AI-based short-terminvestments need a deep understanding of financial and financial theory, such asmarket abnormalities and multi-factor models. AI can create most value in riskmanagement. In particular, AI can assist forward-looking risk managementusing alternative big data. It is highly desirable that some asset managers makethis attempt. However, most domestic financial institutions do not fully utilizethe advantages of AI in investment decision-making.}