SlideShare a Scribd company logo

Yazann Romahi at AI Frontiers : The Pitfalls of Using AI in Financial Investing

Because of the success of momentum based strategies, most AI practitioners come into finance thinking they can achieve easy wins by applying AI to time series analysis. We outline how this can be a trap, and other common misconceptions about AI in finance. We discuss the value of new sources of data and how we have used them successfully. By way of example we walk through an application of natural language processing to enhance our equity long/short and event driven hedge fund strategies.

1 of 14
Download to read offline
FOR EDUCATIONAL PURPOSES ONLY | NOT INTENDED TO BE USED AS ADVERTISING OR SALES LITERATURE
The Pitfalls of Using AI in Financial Investing
November 2018
Yazann Romahi, PhD
1 | FOR EDUCATIONAL PURPOSES ONLY | NOT INTENDED TO BE USED AS ADVERTISING OR SALES LITERATURE
Areas of AI Applications in Finance
Trading
Fraud Detection
Credit LendingImage Recognition
Robo-Advisors
For illustrative purposes only
$
Asset Management
2 | FOR EDUCATIONAL PURPOSES ONLY | NOT INTENDED TO BE USED AS ADVERTISING OR SALES LITERATURE
The March of Quantitative Methods in Financial Investing
Markowitz
Modern
Portfolio
Theory
Louis
Bachelier’s
Thesis
published
Rapid
Advances
in Portfolio
Theory
1980s
First CTA
funds
1990s
Growth of
Quant Equity
Long Short
Hedge Funds
2000s
Increasing Use
of AI in Trading
Strategies
2009-
Growth of
Alternative
Beta
Growth of Quantitative Investing Strategies
New sources
Of Data
Rapidly Being
Created
1900 1952 1960s 1980 2010 2014
𝒌=𝟎
𝒏
𝒏
𝒌
𝒙 𝒌
For illustrative purposes only
3 | FOR EDUCATIONAL PURPOSES ONLY | NOT INTENDED TO BE USED AS ADVERTISING OR SALES LITERATURE
Understanding Approaches to Building Investment Strategies
$370 Bn
$973 Bn
Hedge Fund and CTA AUM
Trend Following
 Trend-following hedge funds (also known as
CTAs) are exclusively quantitatively based
 Typically employ momentum and reversion
signals at different time frequencies
 AI is used, but traditional methods are more
prevalent
Fundamental
Equity
 Quantitative, equity long/short approaches
began to gain prominence in the early 90s.
 Fundamental signals (e.g. valuation, quality) are
an important component of these processes
 New sources of data are creating new
opportunities for alpha generation
Source: BarclayHedge as of 2Q 2018. For illustrative purposes only
4 | FOR EDUCATIONAL PURPOSES ONLY | NOT INTENDED TO BE USED AS ADVERTISING OR SALES LITERATURE
An Expansion of the Quant’s Toolkit
NEW TECHNIQUES
TRADITIONAL
DATA
NEWDATA
TRADITIONAL TECHNIQUES
Building a neural
network (machine
learning) on textual data
Building random
forests for fraud
detection
Time series extracted
from satellite data of
industrial sites in China
Regression on
Earnings Yield;
Time series analysis
using econometrics
For illustrative purposes only
5 | FOR EDUCATIONAL PURPOSES ONLY | NOT INTENDED TO BE USED AS ADVERTISING OR SALES LITERATURE
New Data Sources Abound
of the data available today has been
collected in the last two years90%
Alternative Data
Individuals Business Processes Sensors
Social Media Transaction Data Satellites
News and Reviews Corporate Data Geo-location
Web Searches,
Personal Data
Government Agencies Data Other Sensors
For illustrative purposes only

Recommended

Ashok Srivastava at AI Frontiers : Using AI to Solve Complex Economic Problems
Ashok Srivastava at AI Frontiers : Using AI to Solve Complex Economic ProblemsAshok Srivastava at AI Frontiers : Using AI to Solve Complex Economic Problems
Ashok Srivastava at AI Frontiers : Using AI to Solve Complex Economic ProblemsAI Frontiers
 
StartUp Health Insights - Digital Health Funding Rankings Q3 2014
StartUp Health Insights  - Digital Health Funding Rankings Q3 2014StartUp Health Insights  - Digital Health Funding Rankings Q3 2014
StartUp Health Insights - Digital Health Funding Rankings Q3 2014StartUp Health
 
CB Insights | AI in Healthcare
CB Insights | AI in HealthcareCB Insights | AI in Healthcare
CB Insights | AI in HealthcareGalen Growth
 
CB insights game changers 2020
CB insights game changers 2020CB insights game changers 2020
CB insights game changers 2020nfinitiv
 
The Role of AI in Healthcare - EZDI
The Role of AI in Healthcare - EZDIThe Role of AI in Healthcare - EZDI
The Role of AI in Healthcare - EZDIezDI
 
Outlook on Artificial Intelligence in the Enterprise 2016
Outlook on Artificial Intelligence in the Enterprise 2016Outlook on Artificial Intelligence in the Enterprise 2016
Outlook on Artificial Intelligence in the Enterprise 2016Narrative Science
 
Deliver responsible innovation at scale with Advanced Natural Language Genera...
Deliver responsible innovation at scale with Advanced Natural Language Genera...Deliver responsible innovation at scale with Advanced Natural Language Genera...
Deliver responsible innovation at scale with Advanced Natural Language Genera...Narrative Science
 
@sardire preso for AIMed @ai_in_medicine #aimedna startup workshop
@sardire preso for AIMed @ai_in_medicine #aimedna startup workshop @sardire preso for AIMed @ai_in_medicine #aimedna startup workshop
@sardire preso for AIMed @ai_in_medicine #aimedna startup workshop Steve Ardire
 

More Related Content

What's hot

Startup Health | HealthTech Funding | Q1 2017
Startup Health | HealthTech Funding | Q1 2017Startup Health | HealthTech Funding | Q1 2017
Startup Health | HealthTech Funding | Q1 2017Galen Growth
 
What do Californians think about Artificial Intelligence?
What do Californians think about Artificial Intelligence?What do Californians think about Artificial Intelligence?
What do Californians think about Artificial Intelligence?accenture
 
Galen Growth Asia InsurByte 2017
Galen Growth Asia InsurByte 2017Galen Growth Asia InsurByte 2017
Galen Growth Asia InsurByte 2017Galen Growth
 
Losing the Cyber Culture War in Healthcare: Accenture 2018 Healthcare Workfor...
Losing the Cyber Culture War in Healthcare: Accenture 2018 Healthcare Workfor...Losing the Cyber Culture War in Healthcare: Accenture 2018 Healthcare Workfor...
Losing the Cyber Culture War in Healthcare: Accenture 2018 Healthcare Workfor...accenture
 
Infographic: Symantec Healthcare IT Security Risk Management Study
Infographic: Symantec Healthcare IT Security Risk Management StudyInfographic: Symantec Healthcare IT Security Risk Management Study
Infographic: Symantec Healthcare IT Security Risk Management StudyCheapSSLsecurity
 
HIMSS Analytics® - 17 Technologies Shaping Hospital Purchases in 2016
HIMSS Analytics®  - 17 Technologies Shaping Hospital Purchases in 2016HIMSS Analytics®  - 17 Technologies Shaping Hospital Purchases in 2016
HIMSS Analytics® - 17 Technologies Shaping Hospital Purchases in 2016HIMSS Analytics
 
Validating AI for Healthcare
Validating AI for HealthcareValidating AI for Healthcare
Validating AI for HealthcareTaylur Ngo
 
Addressing Cybersecurity Strategically
Addressing Cybersecurity Strategically Addressing Cybersecurity Strategically
Addressing Cybersecurity Strategically Symantec
 
Healthcare Technology Predictions 2016
Healthcare Technology Predictions 2016Healthcare Technology Predictions 2016
Healthcare Technology Predictions 2016Damo Consulting Inc.
 
Asia Pacific Corporate Health Landscape | Galen Growth Asia
Asia Pacific Corporate Health Landscape | Galen Growth AsiaAsia Pacific Corporate Health Landscape | Galen Growth Asia
Asia Pacific Corporate Health Landscape | Galen Growth AsiaGalen Growth
 
Galen Growth Asia RESI 2017 Presentation
Galen Growth Asia RESI 2017 PresentationGalen Growth Asia RESI 2017 Presentation
Galen Growth Asia RESI 2017 PresentationGalen Growth
 
2017 Consumer Survey: Healthcare Cybersecurity and Digital Trust
2017 Consumer Survey: Healthcare Cybersecurity and Digital Trust2017 Consumer Survey: Healthcare Cybersecurity and Digital Trust
2017 Consumer Survey: Healthcare Cybersecurity and Digital Trustaccenture
 
Accelerating Growth With Applied Customer Engagement
Accelerating Growth With Applied Customer EngagementAccelerating Growth With Applied Customer Engagement
Accelerating Growth With Applied Customer EngagementAccenture Insurance
 
Galen Growth Asia HealthTech Summit 2018 | Asia HealthTech Key Trends
Galen Growth Asia HealthTech Summit 2018 | Asia HealthTech Key TrendsGalen Growth Asia HealthTech Summit 2018 | Asia HealthTech Key Trends
Galen Growth Asia HealthTech Summit 2018 | Asia HealthTech Key TrendsGalen Growth
 
Asia HealthTech Investment Landscape 2017 Full Year report
Asia HealthTech Investment Landscape 2017 Full Year reportAsia HealthTech Investment Landscape 2017 Full Year report
Asia HealthTech Investment Landscape 2017 Full Year reportGalen Growth
 
Converting Cost to Growth -- Strategic Cost Reduction in Banking
Converting Cost to Growth -- Strategic Cost Reduction in BankingConverting Cost to Growth -- Strategic Cost Reduction in Banking
Converting Cost to Growth -- Strategic Cost Reduction in Bankingaccenture
 
The Pulse of Pensions: What Members Really Think of Their Pension Plans and R...
The Pulse of Pensions: What Members Really Think of Their Pension Plans and R...The Pulse of Pensions: What Members Really Think of Their Pension Plans and R...
The Pulse of Pensions: What Members Really Think of Their Pension Plans and R...accenture
 
AI Weekly - February 3, 2020
AI Weekly - February 3, 2020AI Weekly - February 3, 2020
AI Weekly - February 3, 2020Bruno Aziza
 
New Science: Pharma's new growth machine
New Science: Pharma's new growth machineNew Science: Pharma's new growth machine
New Science: Pharma's new growth machineaccenture
 
Data Is the New Strategic Asset in M&As: Is Ripping and Replacing EHRs Really...
Data Is the New Strategic Asset in M&As: Is Ripping and Replacing EHRs Really...Data Is the New Strategic Asset in M&As: Is Ripping and Replacing EHRs Really...
Data Is the New Strategic Asset in M&As: Is Ripping and Replacing EHRs Really...Health Catalyst
 

What's hot (20)

Startup Health | HealthTech Funding | Q1 2017
Startup Health | HealthTech Funding | Q1 2017Startup Health | HealthTech Funding | Q1 2017
Startup Health | HealthTech Funding | Q1 2017
 
What do Californians think about Artificial Intelligence?
What do Californians think about Artificial Intelligence?What do Californians think about Artificial Intelligence?
What do Californians think about Artificial Intelligence?
 
Galen Growth Asia InsurByte 2017
Galen Growth Asia InsurByte 2017Galen Growth Asia InsurByte 2017
Galen Growth Asia InsurByte 2017
 
Losing the Cyber Culture War in Healthcare: Accenture 2018 Healthcare Workfor...
Losing the Cyber Culture War in Healthcare: Accenture 2018 Healthcare Workfor...Losing the Cyber Culture War in Healthcare: Accenture 2018 Healthcare Workfor...
Losing the Cyber Culture War in Healthcare: Accenture 2018 Healthcare Workfor...
 
Infographic: Symantec Healthcare IT Security Risk Management Study
Infographic: Symantec Healthcare IT Security Risk Management StudyInfographic: Symantec Healthcare IT Security Risk Management Study
Infographic: Symantec Healthcare IT Security Risk Management Study
 
HIMSS Analytics® - 17 Technologies Shaping Hospital Purchases in 2016
HIMSS Analytics®  - 17 Technologies Shaping Hospital Purchases in 2016HIMSS Analytics®  - 17 Technologies Shaping Hospital Purchases in 2016
HIMSS Analytics® - 17 Technologies Shaping Hospital Purchases in 2016
 
Validating AI for Healthcare
Validating AI for HealthcareValidating AI for Healthcare
Validating AI for Healthcare
 
Addressing Cybersecurity Strategically
Addressing Cybersecurity Strategically Addressing Cybersecurity Strategically
Addressing Cybersecurity Strategically
 
Healthcare Technology Predictions 2016
Healthcare Technology Predictions 2016Healthcare Technology Predictions 2016
Healthcare Technology Predictions 2016
 
Asia Pacific Corporate Health Landscape | Galen Growth Asia
Asia Pacific Corporate Health Landscape | Galen Growth AsiaAsia Pacific Corporate Health Landscape | Galen Growth Asia
Asia Pacific Corporate Health Landscape | Galen Growth Asia
 
Galen Growth Asia RESI 2017 Presentation
Galen Growth Asia RESI 2017 PresentationGalen Growth Asia RESI 2017 Presentation
Galen Growth Asia RESI 2017 Presentation
 
2017 Consumer Survey: Healthcare Cybersecurity and Digital Trust
2017 Consumer Survey: Healthcare Cybersecurity and Digital Trust2017 Consumer Survey: Healthcare Cybersecurity and Digital Trust
2017 Consumer Survey: Healthcare Cybersecurity and Digital Trust
 
Accelerating Growth With Applied Customer Engagement
Accelerating Growth With Applied Customer EngagementAccelerating Growth With Applied Customer Engagement
Accelerating Growth With Applied Customer Engagement
 
Galen Growth Asia HealthTech Summit 2018 | Asia HealthTech Key Trends
Galen Growth Asia HealthTech Summit 2018 | Asia HealthTech Key TrendsGalen Growth Asia HealthTech Summit 2018 | Asia HealthTech Key Trends
Galen Growth Asia HealthTech Summit 2018 | Asia HealthTech Key Trends
 
Asia HealthTech Investment Landscape 2017 Full Year report
Asia HealthTech Investment Landscape 2017 Full Year reportAsia HealthTech Investment Landscape 2017 Full Year report
Asia HealthTech Investment Landscape 2017 Full Year report
 
Converting Cost to Growth -- Strategic Cost Reduction in Banking
Converting Cost to Growth -- Strategic Cost Reduction in BankingConverting Cost to Growth -- Strategic Cost Reduction in Banking
Converting Cost to Growth -- Strategic Cost Reduction in Banking
 
The Pulse of Pensions: What Members Really Think of Their Pension Plans and R...
The Pulse of Pensions: What Members Really Think of Their Pension Plans and R...The Pulse of Pensions: What Members Really Think of Their Pension Plans and R...
The Pulse of Pensions: What Members Really Think of Their Pension Plans and R...
 
AI Weekly - February 3, 2020
AI Weekly - February 3, 2020AI Weekly - February 3, 2020
AI Weekly - February 3, 2020
 
New Science: Pharma's new growth machine
New Science: Pharma's new growth machineNew Science: Pharma's new growth machine
New Science: Pharma's new growth machine
 
Data Is the New Strategic Asset in M&As: Is Ripping and Replacing EHRs Really...
Data Is the New Strategic Asset in M&As: Is Ripping and Replacing EHRs Really...Data Is the New Strategic Asset in M&As: Is Ripping and Replacing EHRs Really...
Data Is the New Strategic Asset in M&As: Is Ripping and Replacing EHRs Really...
 

Similar to Yazann Romahi at AI Frontiers : The Pitfalls of Using AI in Financial Investing

Linking Strategic Planning with Operational Planning, Thomson Reuters
Linking Strategic Planning with Operational Planning, Thomson ReutersLinking Strategic Planning with Operational Planning, Thomson Reuters
Linking Strategic Planning with Operational Planning, Thomson ReutersInnovation Enterprise
 
KeyHouse Analytics opening in March 2018
KeyHouse Analytics opening in March 2018KeyHouse Analytics opening in March 2018
KeyHouse Analytics opening in March 2018Kip Schoonover
 
AI in Financial Asset Management Market – Notable Developments, Upcoming Tren...
AI in Financial Asset Management Market – Notable Developments, Upcoming Tren...AI in Financial Asset Management Market – Notable Developments, Upcoming Tren...
AI in Financial Asset Management Market – Notable Developments, Upcoming Tren...ShivamGaur62
 
Strategic management assignment wipro
Strategic management assignment wiproStrategic management assignment wipro
Strategic management assignment wipronisha_chandra
 
What Is Unlocking The Value Of Data
What Is Unlocking The Value Of DataWhat Is Unlocking The Value Of Data
What Is Unlocking The Value Of DataLaura Benitez
 
Management consulting services
Management consulting servicesManagement consulting services
Management consulting servicesGUDURUSRIKANTH1
 
Global trends in AI and healthcare
Global trends in AI and healthcareGlobal trends in AI and healthcare
Global trends in AI and healthcareBooster
 
Business strategic plan for simaton 1
Business strategic plan for simaton 1Business strategic plan for simaton 1
Business strategic plan for simaton 1Fred Mmbololo
 
Hubs ir deck q417 final
Hubs ir deck q417 finalHubs ir deck q417 final
Hubs ir deck q417 finalIR_HubSpot
 
CapitalX partners
CapitalX partners CapitalX partners
CapitalX partners Mark Bryson
 
Sme in pakistan
Sme in pakistanSme in pakistan
Sme in pakistanSami Swati
 
Global Investment Banking & Brokerage By IBISWorld
Global Investment Banking & Brokerage By IBISWorldGlobal Investment Banking & Brokerage By IBISWorld
Global Investment Banking & Brokerage By IBISWorldMarketResearch.com
 
White paper financial analytics
White paper financial analytics White paper financial analytics
White paper financial analytics NathanMcKay9
 

Similar to Yazann Romahi at AI Frontiers : The Pitfalls of Using AI in Financial Investing (20)

Linking Strategic Planning with Operational Planning, Thomson Reuters
Linking Strategic Planning with Operational Planning, Thomson ReutersLinking Strategic Planning with Operational Planning, Thomson Reuters
Linking Strategic Planning with Operational Planning, Thomson Reuters
 
KeyHouse Analytics opening in March 2018
KeyHouse Analytics opening in March 2018KeyHouse Analytics opening in March 2018
KeyHouse Analytics opening in March 2018
 
Where next?
Where next?Where next?
Where next?
 
AI in Financial Asset Management Market – Notable Developments, Upcoming Tren...
AI in Financial Asset Management Market – Notable Developments, Upcoming Tren...AI in Financial Asset Management Market – Notable Developments, Upcoming Tren...
AI in Financial Asset Management Market – Notable Developments, Upcoming Tren...
 
New Fintech report
New Fintech reportNew Fintech report
New Fintech report
 
Strategic management assignment wipro
Strategic management assignment wiproStrategic management assignment wipro
Strategic management assignment wipro
 
What Is Unlocking The Value Of Data
What Is Unlocking The Value Of DataWhat Is Unlocking The Value Of Data
What Is Unlocking The Value Of Data
 
Methodical Investment Management
Methodical Investment ManagementMethodical Investment Management
Methodical Investment Management
 
Management consulting services
Management consulting servicesManagement consulting services
Management consulting services
 
Global trends in AI and healthcare
Global trends in AI and healthcareGlobal trends in AI and healthcare
Global trends in AI and healthcare
 
Business strategic plan for simaton 1
Business strategic plan for simaton 1Business strategic plan for simaton 1
Business strategic plan for simaton 1
 
Hubs ir deck q417 final
Hubs ir deck q417 finalHubs ir deck q417 final
Hubs ir deck q417 final
 
CapitalX partners
CapitalX partners CapitalX partners
CapitalX partners
 
Sme in pakistan
Sme in pakistanSme in pakistan
Sme in pakistan
 
Go Beyond Investor Report 2015
Go Beyond Investor Report 2015Go Beyond Investor Report 2015
Go Beyond Investor Report 2015
 
Anchor bci equity fund
Anchor bci equity fundAnchor bci equity fund
Anchor bci equity fund
 
Global Investment Banking & Brokerage By IBISWorld
Global Investment Banking & Brokerage By IBISWorldGlobal Investment Banking & Brokerage By IBISWorld
Global Investment Banking & Brokerage By IBISWorld
 
netwealth Educational Webinar - Global Trends in Financial Advice
netwealth Educational Webinar - Global Trends in Financial Advicenetwealth Educational Webinar - Global Trends in Financial Advice
netwealth Educational Webinar - Global Trends in Financial Advice
 
White paper financial analytics
White paper financial analytics White paper financial analytics
White paper financial analytics
 
Quantic brochure-en-130319
Quantic brochure-en-130319Quantic brochure-en-130319
Quantic brochure-en-130319
 

More from AI Frontiers

Divya Jain at AI Frontiers : Video Summarization
Divya Jain at AI Frontiers : Video SummarizationDivya Jain at AI Frontiers : Video Summarization
Divya Jain at AI Frontiers : Video SummarizationAI Frontiers
 
Training at AI Frontiers 2018 - LaiOffer Data Session: How Spark Speedup AI
Training at AI Frontiers 2018 - LaiOffer Data Session: How Spark Speedup AI Training at AI Frontiers 2018 - LaiOffer Data Session: How Spark Speedup AI
Training at AI Frontiers 2018 - LaiOffer Data Session: How Spark Speedup AI AI Frontiers
 
Training at AI Frontiers 2018 - LaiOffer Self-Driving-Car-Lecture 1: Heuristi...
Training at AI Frontiers 2018 - LaiOffer Self-Driving-Car-Lecture 1: Heuristi...Training at AI Frontiers 2018 - LaiOffer Self-Driving-Car-Lecture 1: Heuristi...
Training at AI Frontiers 2018 - LaiOffer Self-Driving-Car-Lecture 1: Heuristi...AI Frontiers
 
Training at AI Frontiers 2018 - Ni Lao: Weakly Supervised Natural Language Un...
Training at AI Frontiers 2018 - Ni Lao: Weakly Supervised Natural Language Un...Training at AI Frontiers 2018 - Ni Lao: Weakly Supervised Natural Language Un...
Training at AI Frontiers 2018 - Ni Lao: Weakly Supervised Natural Language Un...AI Frontiers
 
Training at AI Frontiers 2018 - LaiOffer Self-Driving-Car-lecture 2: Incremen...
Training at AI Frontiers 2018 - LaiOffer Self-Driving-Car-lecture 2: Incremen...Training at AI Frontiers 2018 - LaiOffer Self-Driving-Car-lecture 2: Incremen...
Training at AI Frontiers 2018 - LaiOffer Self-Driving-Car-lecture 2: Incremen...AI Frontiers
 
Training at AI Frontiers 2018 - Udacity: Enhancing NLP with Deep Neural Networks
Training at AI Frontiers 2018 - Udacity: Enhancing NLP with Deep Neural NetworksTraining at AI Frontiers 2018 - Udacity: Enhancing NLP with Deep Neural Networks
Training at AI Frontiers 2018 - Udacity: Enhancing NLP with Deep Neural NetworksAI Frontiers
 
Training at AI Frontiers 2018 - LaiOffer Self-Driving-Car-Lecture 3: Any-Angl...
Training at AI Frontiers 2018 - LaiOffer Self-Driving-Car-Lecture 3: Any-Angl...Training at AI Frontiers 2018 - LaiOffer Self-Driving-Car-Lecture 3: Any-Angl...
Training at AI Frontiers 2018 - LaiOffer Self-Driving-Car-Lecture 3: Any-Angl...AI Frontiers
 
Training at AI Frontiers 2018 - Lukasz Kaiser: Sequence to Sequence Learning ...
Training at AI Frontiers 2018 - Lukasz Kaiser: Sequence to Sequence Learning ...Training at AI Frontiers 2018 - Lukasz Kaiser: Sequence to Sequence Learning ...
Training at AI Frontiers 2018 - Lukasz Kaiser: Sequence to Sequence Learning ...AI Frontiers
 
Percy Liang at AI Frontiers : Pushing the Limits of Machine Learning
Percy Liang at AI Frontiers : Pushing the Limits of Machine LearningPercy Liang at AI Frontiers : Pushing the Limits of Machine Learning
Percy Liang at AI Frontiers : Pushing the Limits of Machine LearningAI Frontiers
 
Ilya Sutskever at AI Frontiers : Progress towards the OpenAI mission
Ilya Sutskever at AI Frontiers : Progress towards the OpenAI missionIlya Sutskever at AI Frontiers : Progress towards the OpenAI mission
Ilya Sutskever at AI Frontiers : Progress towards the OpenAI missionAI Frontiers
 
Mark Moore at AI Frontiers : Uber Elevate
Mark Moore at AI Frontiers : Uber ElevateMark Moore at AI Frontiers : Uber Elevate
Mark Moore at AI Frontiers : Uber ElevateAI Frontiers
 
Mario Munich at AI Frontiers : Consumer robotics: embedding affordable AI in ...
Mario Munich at AI Frontiers : Consumer robotics: embedding affordable AI in ...Mario Munich at AI Frontiers : Consumer robotics: embedding affordable AI in ...
Mario Munich at AI Frontiers : Consumer robotics: embedding affordable AI in ...AI Frontiers
 
Arnaud Thiercelin at AI Frontiers : AI in the Sky
Arnaud Thiercelin at AI Frontiers : AI in the SkyArnaud Thiercelin at AI Frontiers : AI in the Sky
Arnaud Thiercelin at AI Frontiers : AI in the SkyAI Frontiers
 
Anima Anandkumar at AI Frontiers : Modern ML : Deep, distributed, Multi-dimen...
Anima Anandkumar at AI Frontiers : Modern ML : Deep, distributed, Multi-dimen...Anima Anandkumar at AI Frontiers : Modern ML : Deep, distributed, Multi-dimen...
Anima Anandkumar at AI Frontiers : Modern ML : Deep, distributed, Multi-dimen...AI Frontiers
 
Wei Xu at AI Frontiers : Language Learning in an Interactive and Embodied Set...
Wei Xu at AI Frontiers : Language Learning in an Interactive and Embodied Set...Wei Xu at AI Frontiers : Language Learning in an Interactive and Embodied Set...
Wei Xu at AI Frontiers : Language Learning in an Interactive and Embodied Set...AI Frontiers
 
Sumit Gupta at AI Frontiers : AI for Enterprise
Sumit Gupta at AI Frontiers : AI for EnterpriseSumit Gupta at AI Frontiers : AI for Enterprise
Sumit Gupta at AI Frontiers : AI for EnterpriseAI Frontiers
 
Yuandong Tian at AI Frontiers : Planning in Reinforcement Learning
Yuandong Tian at AI Frontiers : Planning in Reinforcement LearningYuandong Tian at AI Frontiers : Planning in Reinforcement Learning
Yuandong Tian at AI Frontiers : Planning in Reinforcement LearningAI Frontiers
 
Alex Ermolaev at AI Frontiers : Major Applications of AI in Healthcare
Alex Ermolaev at AI Frontiers : Major Applications of AI in HealthcareAlex Ermolaev at AI Frontiers : Major Applications of AI in Healthcare
Alex Ermolaev at AI Frontiers : Major Applications of AI in HealthcareAI Frontiers
 
Long Lin at AI Frontiers : AI in Gaming
Long Lin at AI Frontiers : AI in GamingLong Lin at AI Frontiers : AI in Gaming
Long Lin at AI Frontiers : AI in GamingAI Frontiers
 
Melissa Goldman at AI Frontiers : AI & Finance
Melissa Goldman at AI Frontiers : AI & FinanceMelissa Goldman at AI Frontiers : AI & Finance
Melissa Goldman at AI Frontiers : AI & FinanceAI Frontiers
 

More from AI Frontiers (20)

Divya Jain at AI Frontiers : Video Summarization
Divya Jain at AI Frontiers : Video SummarizationDivya Jain at AI Frontiers : Video Summarization
Divya Jain at AI Frontiers : Video Summarization
 
Training at AI Frontiers 2018 - LaiOffer Data Session: How Spark Speedup AI
Training at AI Frontiers 2018 - LaiOffer Data Session: How Spark Speedup AI Training at AI Frontiers 2018 - LaiOffer Data Session: How Spark Speedup AI
Training at AI Frontiers 2018 - LaiOffer Data Session: How Spark Speedup AI
 
Training at AI Frontiers 2018 - LaiOffer Self-Driving-Car-Lecture 1: Heuristi...
Training at AI Frontiers 2018 - LaiOffer Self-Driving-Car-Lecture 1: Heuristi...Training at AI Frontiers 2018 - LaiOffer Self-Driving-Car-Lecture 1: Heuristi...
Training at AI Frontiers 2018 - LaiOffer Self-Driving-Car-Lecture 1: Heuristi...
 
Training at AI Frontiers 2018 - Ni Lao: Weakly Supervised Natural Language Un...
Training at AI Frontiers 2018 - Ni Lao: Weakly Supervised Natural Language Un...Training at AI Frontiers 2018 - Ni Lao: Weakly Supervised Natural Language Un...
Training at AI Frontiers 2018 - Ni Lao: Weakly Supervised Natural Language Un...
 
Training at AI Frontiers 2018 - LaiOffer Self-Driving-Car-lecture 2: Incremen...
Training at AI Frontiers 2018 - LaiOffer Self-Driving-Car-lecture 2: Incremen...Training at AI Frontiers 2018 - LaiOffer Self-Driving-Car-lecture 2: Incremen...
Training at AI Frontiers 2018 - LaiOffer Self-Driving-Car-lecture 2: Incremen...
 
Training at AI Frontiers 2018 - Udacity: Enhancing NLP with Deep Neural Networks
Training at AI Frontiers 2018 - Udacity: Enhancing NLP with Deep Neural NetworksTraining at AI Frontiers 2018 - Udacity: Enhancing NLP with Deep Neural Networks
Training at AI Frontiers 2018 - Udacity: Enhancing NLP with Deep Neural Networks
 
Training at AI Frontiers 2018 - LaiOffer Self-Driving-Car-Lecture 3: Any-Angl...
Training at AI Frontiers 2018 - LaiOffer Self-Driving-Car-Lecture 3: Any-Angl...Training at AI Frontiers 2018 - LaiOffer Self-Driving-Car-Lecture 3: Any-Angl...
Training at AI Frontiers 2018 - LaiOffer Self-Driving-Car-Lecture 3: Any-Angl...
 
Training at AI Frontiers 2018 - Lukasz Kaiser: Sequence to Sequence Learning ...
Training at AI Frontiers 2018 - Lukasz Kaiser: Sequence to Sequence Learning ...Training at AI Frontiers 2018 - Lukasz Kaiser: Sequence to Sequence Learning ...
Training at AI Frontiers 2018 - Lukasz Kaiser: Sequence to Sequence Learning ...
 
Percy Liang at AI Frontiers : Pushing the Limits of Machine Learning
Percy Liang at AI Frontiers : Pushing the Limits of Machine LearningPercy Liang at AI Frontiers : Pushing the Limits of Machine Learning
Percy Liang at AI Frontiers : Pushing the Limits of Machine Learning
 
Ilya Sutskever at AI Frontiers : Progress towards the OpenAI mission
Ilya Sutskever at AI Frontiers : Progress towards the OpenAI missionIlya Sutskever at AI Frontiers : Progress towards the OpenAI mission
Ilya Sutskever at AI Frontiers : Progress towards the OpenAI mission
 
Mark Moore at AI Frontiers : Uber Elevate
Mark Moore at AI Frontiers : Uber ElevateMark Moore at AI Frontiers : Uber Elevate
Mark Moore at AI Frontiers : Uber Elevate
 
Mario Munich at AI Frontiers : Consumer robotics: embedding affordable AI in ...
Mario Munich at AI Frontiers : Consumer robotics: embedding affordable AI in ...Mario Munich at AI Frontiers : Consumer robotics: embedding affordable AI in ...
Mario Munich at AI Frontiers : Consumer robotics: embedding affordable AI in ...
 
Arnaud Thiercelin at AI Frontiers : AI in the Sky
Arnaud Thiercelin at AI Frontiers : AI in the SkyArnaud Thiercelin at AI Frontiers : AI in the Sky
Arnaud Thiercelin at AI Frontiers : AI in the Sky
 
Anima Anandkumar at AI Frontiers : Modern ML : Deep, distributed, Multi-dimen...
Anima Anandkumar at AI Frontiers : Modern ML : Deep, distributed, Multi-dimen...Anima Anandkumar at AI Frontiers : Modern ML : Deep, distributed, Multi-dimen...
Anima Anandkumar at AI Frontiers : Modern ML : Deep, distributed, Multi-dimen...
 
Wei Xu at AI Frontiers : Language Learning in an Interactive and Embodied Set...
Wei Xu at AI Frontiers : Language Learning in an Interactive and Embodied Set...Wei Xu at AI Frontiers : Language Learning in an Interactive and Embodied Set...
Wei Xu at AI Frontiers : Language Learning in an Interactive and Embodied Set...
 
Sumit Gupta at AI Frontiers : AI for Enterprise
Sumit Gupta at AI Frontiers : AI for EnterpriseSumit Gupta at AI Frontiers : AI for Enterprise
Sumit Gupta at AI Frontiers : AI for Enterprise
 
Yuandong Tian at AI Frontiers : Planning in Reinforcement Learning
Yuandong Tian at AI Frontiers : Planning in Reinforcement LearningYuandong Tian at AI Frontiers : Planning in Reinforcement Learning
Yuandong Tian at AI Frontiers : Planning in Reinforcement Learning
 
Alex Ermolaev at AI Frontiers : Major Applications of AI in Healthcare
Alex Ermolaev at AI Frontiers : Major Applications of AI in HealthcareAlex Ermolaev at AI Frontiers : Major Applications of AI in Healthcare
Alex Ermolaev at AI Frontiers : Major Applications of AI in Healthcare
 
Long Lin at AI Frontiers : AI in Gaming
Long Lin at AI Frontiers : AI in GamingLong Lin at AI Frontiers : AI in Gaming
Long Lin at AI Frontiers : AI in Gaming
 
Melissa Goldman at AI Frontiers : AI & Finance
Melissa Goldman at AI Frontiers : AI & FinanceMelissa Goldman at AI Frontiers : AI & Finance
Melissa Goldman at AI Frontiers : AI & Finance
 

Recently uploaded

AI MODELS USAGE IN FINTECH PRODUCTS: PM APPROACH & BEST PRACTICES by Kasthuri...
AI MODELS USAGE IN FINTECH PRODUCTS: PM APPROACH & BEST PRACTICES by Kasthuri...AI MODELS USAGE IN FINTECH PRODUCTS: PM APPROACH & BEST PRACTICES by Kasthuri...
AI MODELS USAGE IN FINTECH PRODUCTS: PM APPROACH & BEST PRACTICES by Kasthuri...ISPMAIndia
 
10 things that helped me advance my career - PHP UK Conference 2024
10 things that helped me advance my career - PHP UK Conference 202410 things that helped me advance my career - PHP UK Conference 2024
10 things that helped me advance my career - PHP UK Conference 2024Thijs Feryn
 
Progress Report: Ministry of IT under Dr. Umar Saif Aug 23-Feb'24
Progress Report: Ministry of IT under Dr. Umar Saif Aug 23-Feb'24Progress Report: Ministry of IT under Dr. Umar Saif Aug 23-Feb'24
Progress Report: Ministry of IT under Dr. Umar Saif Aug 23-Feb'24Umar Saif
 
Dynamical systems simulation in Python for science and engineering
Dynamical systems simulation in Python for science and engineeringDynamical systems simulation in Python for science and engineering
Dynamical systems simulation in Python for science and engineeringMassimo Talia
 
Leveraging SLF4j for Effective Logging in IBM App Connect Enterprise.docx
Leveraging SLF4j for Effective Logging in IBM App Connect Enterprise.docxLeveraging SLF4j for Effective Logging in IBM App Connect Enterprise.docx
Leveraging SLF4j for Effective Logging in IBM App Connect Enterprise.docxVotarikari Shravan
 
Harnessing the Power of GenAI for Exceptional Product Outcomes by Booking.com...
Harnessing the Power of GenAI for Exceptional Product Outcomes by Booking.com...Harnessing the Power of GenAI for Exceptional Product Outcomes by Booking.com...
Harnessing the Power of GenAI for Exceptional Product Outcomes by Booking.com...Product School
 
Relationship Counselling: From Disjointed Features to Product-First Thinking ...
Relationship Counselling: From Disjointed Features to Product-First Thinking ...Relationship Counselling: From Disjointed Features to Product-First Thinking ...
Relationship Counselling: From Disjointed Features to Product-First Thinking ...Product School
 
Enterprise Architecture As Strategy - Book Review
Enterprise Architecture As Strategy - Book ReviewEnterprise Architecture As Strategy - Book Review
Enterprise Architecture As Strategy - Book ReviewAshraf Fouad
 
Battle of React State Managers in frontend applications
Battle of React State Managers in frontend applicationsBattle of React State Managers in frontend applications
Battle of React State Managers in frontend applicationsEvangelia Mitsopoulou
 
Dev Dives: Leverage APIs and Gen AI to power automations for RPA and software...
Dev Dives: Leverage APIs and Gen AI to power automations for RPA and software...Dev Dives: Leverage APIs and Gen AI to power automations for RPA and software...
Dev Dives: Leverage APIs and Gen AI to power automations for RPA and software...UiPathCommunity
 
"Platform Engineering with Development Containers", Igor Fesenko
"Platform Engineering with Development Containers", Igor Fesenko"Platform Engineering with Development Containers", Igor Fesenko
"Platform Engineering with Development Containers", Igor FesenkoFwdays
 
"Running Open-Source LLM models on Kubernetes", Volodymyr Tsap
"Running Open-Source LLM models on Kubernetes",  Volodymyr Tsap"Running Open-Source LLM models on Kubernetes",  Volodymyr Tsap
"Running Open-Source LLM models on Kubernetes", Volodymyr TsapFwdays
 
"DevOps Practisting Platform on EKS with Karpenter autoscaling", Dmytro Kozhevin
"DevOps Practisting Platform on EKS with Karpenter autoscaling", Dmytro Kozhevin"DevOps Practisting Platform on EKS with Karpenter autoscaling", Dmytro Kozhevin
"DevOps Practisting Platform on EKS with Karpenter autoscaling", Dmytro KozhevinFwdays
 
"AIRe - AI Reliability Engineering", Denys Vasyliev
"AIRe - AI Reliability Engineering", Denys Vasyliev"AIRe - AI Reliability Engineering", Denys Vasyliev
"AIRe - AI Reliability Engineering", Denys VasylievFwdays
 
Avoiding Bad Stats and the Benefits of Playing Trivia with Friends: PancakesC...
Avoiding Bad Stats and the Benefits of Playing Trivia with Friends: PancakesC...Avoiding Bad Stats and the Benefits of Playing Trivia with Friends: PancakesC...
Avoiding Bad Stats and the Benefits of Playing Trivia with Friends: PancakesC...Adrian Sanabria
 
Introduction to Multimodal LLMs with LLaVA
Introduction to Multimodal LLMs with LLaVAIntroduction to Multimodal LLMs with LLaVA
Introduction to Multimodal LLMs with LLaVARobert McDermott
 
Enhancing Productivity and Insight A Tour of JDK Tools Progress Beyond Java 17
Enhancing Productivity and Insight  A Tour of JDK Tools Progress Beyond Java 17Enhancing Productivity and Insight  A Tour of JDK Tools Progress Beyond Java 17
Enhancing Productivity and Insight A Tour of JDK Tools Progress Beyond Java 17Ana-Maria Mihalceanu
 
"Testing of Helm Charts or There and Back Again", Yura Rochniak
"Testing of Helm Charts or There and Back Again", Yura Rochniak"Testing of Helm Charts or There and Back Again", Yura Rochniak
"Testing of Helm Charts or There and Back Again", Yura RochniakFwdays
 
Synergy in Leadership and Product Excellence: A Blueprint for Growth by CPO, ...
Synergy in Leadership and Product Excellence: A Blueprint for Growth by CPO, ...Synergy in Leadership and Product Excellence: A Blueprint for Growth by CPO, ...
Synergy in Leadership and Product Excellence: A Blueprint for Growth by CPO, ...Product School
 

Recently uploaded (20)

AI MODELS USAGE IN FINTECH PRODUCTS: PM APPROACH & BEST PRACTICES by Kasthuri...
AI MODELS USAGE IN FINTECH PRODUCTS: PM APPROACH & BEST PRACTICES by Kasthuri...AI MODELS USAGE IN FINTECH PRODUCTS: PM APPROACH & BEST PRACTICES by Kasthuri...
AI MODELS USAGE IN FINTECH PRODUCTS: PM APPROACH & BEST PRACTICES by Kasthuri...
 
10 things that helped me advance my career - PHP UK Conference 2024
10 things that helped me advance my career - PHP UK Conference 202410 things that helped me advance my career - PHP UK Conference 2024
10 things that helped me advance my career - PHP UK Conference 2024
 
Progress Report: Ministry of IT under Dr. Umar Saif Aug 23-Feb'24
Progress Report: Ministry of IT under Dr. Umar Saif Aug 23-Feb'24Progress Report: Ministry of IT under Dr. Umar Saif Aug 23-Feb'24
Progress Report: Ministry of IT under Dr. Umar Saif Aug 23-Feb'24
 
Dynamical systems simulation in Python for science and engineering
Dynamical systems simulation in Python for science and engineeringDynamical systems simulation in Python for science and engineering
Dynamical systems simulation in Python for science and engineering
 
Leveraging SLF4j for Effective Logging in IBM App Connect Enterprise.docx
Leveraging SLF4j for Effective Logging in IBM App Connect Enterprise.docxLeveraging SLF4j for Effective Logging in IBM App Connect Enterprise.docx
Leveraging SLF4j for Effective Logging in IBM App Connect Enterprise.docx
 
Harnessing the Power of GenAI for Exceptional Product Outcomes by Booking.com...
Harnessing the Power of GenAI for Exceptional Product Outcomes by Booking.com...Harnessing the Power of GenAI for Exceptional Product Outcomes by Booking.com...
Harnessing the Power of GenAI for Exceptional Product Outcomes by Booking.com...
 
Relationship Counselling: From Disjointed Features to Product-First Thinking ...
Relationship Counselling: From Disjointed Features to Product-First Thinking ...Relationship Counselling: From Disjointed Features to Product-First Thinking ...
Relationship Counselling: From Disjointed Features to Product-First Thinking ...
 
Enterprise Architecture As Strategy - Book Review
Enterprise Architecture As Strategy - Book ReviewEnterprise Architecture As Strategy - Book Review
Enterprise Architecture As Strategy - Book Review
 
In sharing we trust. Taking advantage of a diverse consortium to build a tran...
In sharing we trust. Taking advantage of a diverse consortium to build a tran...In sharing we trust. Taking advantage of a diverse consortium to build a tran...
In sharing we trust. Taking advantage of a diverse consortium to build a tran...
 
Battle of React State Managers in frontend applications
Battle of React State Managers in frontend applicationsBattle of React State Managers in frontend applications
Battle of React State Managers in frontend applications
 
Dev Dives: Leverage APIs and Gen AI to power automations for RPA and software...
Dev Dives: Leverage APIs and Gen AI to power automations for RPA and software...Dev Dives: Leverage APIs and Gen AI to power automations for RPA and software...
Dev Dives: Leverage APIs and Gen AI to power automations for RPA and software...
 
"Platform Engineering with Development Containers", Igor Fesenko
"Platform Engineering with Development Containers", Igor Fesenko"Platform Engineering with Development Containers", Igor Fesenko
"Platform Engineering with Development Containers", Igor Fesenko
 
"Running Open-Source LLM models on Kubernetes", Volodymyr Tsap
"Running Open-Source LLM models on Kubernetes",  Volodymyr Tsap"Running Open-Source LLM models on Kubernetes",  Volodymyr Tsap
"Running Open-Source LLM models on Kubernetes", Volodymyr Tsap
 
"DevOps Practisting Platform on EKS with Karpenter autoscaling", Dmytro Kozhevin
"DevOps Practisting Platform on EKS with Karpenter autoscaling", Dmytro Kozhevin"DevOps Practisting Platform on EKS with Karpenter autoscaling", Dmytro Kozhevin
"DevOps Practisting Platform on EKS with Karpenter autoscaling", Dmytro Kozhevin
 
"AIRe - AI Reliability Engineering", Denys Vasyliev
"AIRe - AI Reliability Engineering", Denys Vasyliev"AIRe - AI Reliability Engineering", Denys Vasyliev
"AIRe - AI Reliability Engineering", Denys Vasyliev
 
Avoiding Bad Stats and the Benefits of Playing Trivia with Friends: PancakesC...
Avoiding Bad Stats and the Benefits of Playing Trivia with Friends: PancakesC...Avoiding Bad Stats and the Benefits of Playing Trivia with Friends: PancakesC...
Avoiding Bad Stats and the Benefits of Playing Trivia with Friends: PancakesC...
 
Introduction to Multimodal LLMs with LLaVA
Introduction to Multimodal LLMs with LLaVAIntroduction to Multimodal LLMs with LLaVA
Introduction to Multimodal LLMs with LLaVA
 
Enhancing Productivity and Insight A Tour of JDK Tools Progress Beyond Java 17
Enhancing Productivity and Insight  A Tour of JDK Tools Progress Beyond Java 17Enhancing Productivity and Insight  A Tour of JDK Tools Progress Beyond Java 17
Enhancing Productivity and Insight A Tour of JDK Tools Progress Beyond Java 17
 
"Testing of Helm Charts or There and Back Again", Yura Rochniak
"Testing of Helm Charts or There and Back Again", Yura Rochniak"Testing of Helm Charts or There and Back Again", Yura Rochniak
"Testing of Helm Charts or There and Back Again", Yura Rochniak
 
Synergy in Leadership and Product Excellence: A Blueprint for Growth by CPO, ...
Synergy in Leadership and Product Excellence: A Blueprint for Growth by CPO, ...Synergy in Leadership and Product Excellence: A Blueprint for Growth by CPO, ...
Synergy in Leadership and Product Excellence: A Blueprint for Growth by CPO, ...
 

Yazann Romahi at AI Frontiers : The Pitfalls of Using AI in Financial Investing

  • 1. FOR EDUCATIONAL PURPOSES ONLY | NOT INTENDED TO BE USED AS ADVERTISING OR SALES LITERATURE The Pitfalls of Using AI in Financial Investing November 2018 Yazann Romahi, PhD
  • 2. 1 | FOR EDUCATIONAL PURPOSES ONLY | NOT INTENDED TO BE USED AS ADVERTISING OR SALES LITERATURE Areas of AI Applications in Finance Trading Fraud Detection Credit LendingImage Recognition Robo-Advisors For illustrative purposes only $ Asset Management
  • 3. 2 | FOR EDUCATIONAL PURPOSES ONLY | NOT INTENDED TO BE USED AS ADVERTISING OR SALES LITERATURE The March of Quantitative Methods in Financial Investing Markowitz Modern Portfolio Theory Louis Bachelier’s Thesis published Rapid Advances in Portfolio Theory 1980s First CTA funds 1990s Growth of Quant Equity Long Short Hedge Funds 2000s Increasing Use of AI in Trading Strategies 2009- Growth of Alternative Beta Growth of Quantitative Investing Strategies New sources Of Data Rapidly Being Created 1900 1952 1960s 1980 2010 2014 𝒌=𝟎 𝒏 𝒏 𝒌 𝒙 𝒌 For illustrative purposes only
  • 4. 3 | FOR EDUCATIONAL PURPOSES ONLY | NOT INTENDED TO BE USED AS ADVERTISING OR SALES LITERATURE Understanding Approaches to Building Investment Strategies $370 Bn $973 Bn Hedge Fund and CTA AUM Trend Following  Trend-following hedge funds (also known as CTAs) are exclusively quantitatively based  Typically employ momentum and reversion signals at different time frequencies  AI is used, but traditional methods are more prevalent Fundamental Equity  Quantitative, equity long/short approaches began to gain prominence in the early 90s.  Fundamental signals (e.g. valuation, quality) are an important component of these processes  New sources of data are creating new opportunities for alpha generation Source: BarclayHedge as of 2Q 2018. For illustrative purposes only
  • 5. 4 | FOR EDUCATIONAL PURPOSES ONLY | NOT INTENDED TO BE USED AS ADVERTISING OR SALES LITERATURE An Expansion of the Quant’s Toolkit NEW TECHNIQUES TRADITIONAL DATA NEWDATA TRADITIONAL TECHNIQUES Building a neural network (machine learning) on textual data Building random forests for fraud detection Time series extracted from satellite data of industrial sites in China Regression on Earnings Yield; Time series analysis using econometrics For illustrative purposes only
  • 6. 5 | FOR EDUCATIONAL PURPOSES ONLY | NOT INTENDED TO BE USED AS ADVERTISING OR SALES LITERATURE New Data Sources Abound of the data available today has been collected in the last two years90% Alternative Data Individuals Business Processes Sensors Social Media Transaction Data Satellites News and Reviews Corporate Data Geo-location Web Searches, Personal Data Government Agencies Data Other Sensors For illustrative purposes only
  • 7. 6 | FOR EDUCATIONAL PURPOSES ONLY | NOT INTENDED TO BE USED AS ADVERTISING OR SALES LITERATURE Pitfalls of Time Series Analysis in Trading Strategies New sources of data have cross-sectional depth, but lack time-series depth1 Probability of random noise ~30% Not statistically significant (p=0.12) For illustrative purposes only Monthly Trading Model (55% Success Rate) Weekly Trading Model (55% Success Rate)
  • 8. 7 | FOR EDUCATIONAL PURPOSES ONLY | NOT INTENDED TO BE USED AS ADVERTISING OR SALES LITERATURE Pitfalls of Time Series Analysis in Trading Strategies Financial time-series are non-stationary2 Stationary Data -15% -10% -5% 0% 5% 10% 15% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec S&P 500 (Daily Returns, 2008) -1,000 -800 -600 -400 -200 0 200 400 600 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Total Nonfarm Payrolls (Change, Thousands of Persons) Source: Bloomberg, as of November 2018. For illustrative purposes only
  • 9. 8 | FOR EDUCATIONAL PURPOSES ONLY | NOT INTENDED TO BE USED AS ADVERTISING OR SALES LITERATURE Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 S&P500Level Example Financial Time Series Pitfalls of Time Series Analysis in Trading Strategies Everything should be made as simple as possible, but not simpler3 Traditional Methods • Require modeler to determine functional form • Econometrics methods are often perfectly adequate Artificial Intelligence • Significantly higher degrees of freedom allows for flexibility, but is often less statistically robust due to inability to properly test out of sample Source: Bloomberg, as of November 2018. For illustrative purposes only 0 20 40 60 80 100 120 ModelError Model Complexity Model Complexity vs. Error Total Model Error In-sample Error Best Model
  • 10. 9 | FOR EDUCATIONAL PURPOSES ONLY | NOT INTENDED TO BE USED AS ADVERTISING OR SALES LITERATURE 100 120 140 160 180 200 220 240 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Subject Matter Expertise is Key: An Example Corporate activity is a source of binary idiosyncratic risk Stock price movements following confirmation or denial of a merger agreement News articles are a source of useful information, if appropriately handled For illustrative purposes only
  • 11. 10 | FOR EDUCATIONAL PURPOSES ONLY | NOT INTENDED TO BE USED AS ADVERTISING OR SALES LITERATURE 2% RELEVANT NEWSMILLIONS OF ARTICLES PER YEAR1 Investment Process Application of AI: NewsFilter 1 For illustrative purposes only 2 Awarded based on use of machine-learning based News-Filter Most Cutting-Edge IT Initiative Best use of Emerging or Innovative Technology AWARDS2 AI can provide a solution to managing large data sets more effectively allowing it to be systematically incorporated in factor portfolios
  • 12. 11 | FOR EDUCATIONAL PURPOSES ONLY | NOT INTENDED TO BE USED AS ADVERTISING OR SALES LITERATURE Investment Process Application of AI: NewsFilter Machine learning algorithm can improve performance by reducing idiosyncratic risk Source: J.P. Morgan Asset Management, Bloomberg 15 20 25 30 35 1-Sep 15-Sep 29-Sep 13-Oct 27-Oct 10-Nov 24-Nov 8-Dec 22-Dec General Cable Corporation ~75% increase in price post rumor Identification of M&A rumor led to short constraint on General Cable in equity factor models, preventing loss of 25bps at portfolio level
  • 13. 12 | FOR EDUCATIONAL PURPOSES ONLY | NOT INTENDED TO BE USED AS ADVERTISING OR SALES LITERATURE Areas of AI Applications at J.P. Morgan Asset Management Trading Using reinforcement learning in enhanced trading Earnings Revisions Analysis of company earnings reports and Q&A yielding better estimates of earnings Image Recognition Analysis of industrial site satellite imagery in China as a leading indicator of industrial production Thematic Portfolios Using NLP of news, social media and financial reports, to create on demand thematic portfolio ideas $
  • 14. 13 | FOR EDUCATIONAL PURPOSES ONLY | NOT INTENDED TO BE USED AS ADVERTISING OR SALES LITERATURE Disclosures The views contained herein are not to be taken as advice or a recommendation to buy or sell any investment in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit and accounting implications and determine, together with their own professional advisers, if any investment mentioned herein is believed to be suitable to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results. J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. To the extent permitted by applicable law, we may record telephone calls and monitor electronic communications to comply with our legal and regulatory obligations and internal policies. Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with our Company’s Privacy Policy. For further information regarding our regional privacy policies please refer to the EMEA Privacy Policy; for locational Asia Pacific privacy policies, please click on the respective links: Hong Kong Privacy Policy, Australia Privacy Policy, Taiwan Privacy Policy, Japan Privacy Policy and Singapore Privacy Policy. This communication is issued by the following entities: in the United Kingdom by JPMorgan Asset Management (UK) Limited, which is authorized and regulated by the Financial Conduct Authority; in other European jurisdictions by JPMorgan Asset Management (Europe) S.à r.l.; in Hong Kong by JF Asset Management Limited, or JPMorgan Funds (Asia) Limited, or JPMorgan Asset Management Real Assets (Asia) Limited; in Singapore by JPMorgan Asset Management (Singapore) Limited (Co. Reg. No. 197601586K), or JPMorgan Asset Management Real Assets (Singapore) Pte Ltd (Co. Reg. No. 201120355E); in Taiwan by JPMorgan Asset Management (Taiwan) Limited; in Japan by JPMorgan Asset Management (Japan) Limited which is a member of the Investment Trusts Association, Japan, the Japan Investment Advisers Association, Type II Financial Instruments Firms Association and the Japan Securities Dealers Association and is regulated by the Financial Services Agency (registration number “Kanto Local Finance Bureau (Financial Instruments Firm) No. 330”); in Australia to wholesale clients only as defined in section 761A and 761G of the Corporations Act 2001 (Cth) by JPMorgan Asset Management (Australia) Limited (ABN 55143832080) (AFSL 376919); in Brazil by Banco J.P. Morgan S.A.; in Canada for institutional clients’ use only by JPMorgan Asset Management (Canada) Inc., and in the United States by JPMorgan Distribution Services Inc. and J.P. Morgan Institutional Investments, Inc., both members of FINRA; and J.P. Morgan Investment Management Inc. In APAC, distribution is for Hong Kong, Taiwan, Japan and Singapore. For all other countries in APAC, to intended recipients only. Copyright 2018 JPMorgan Chase & Co. All rights reserved.

Editor's Notes

  1. Maybe put right after timeline? Going to walk through main areas of quant use in HF land Two main areas – find better icons? Ai – Smarter trend following, but traditional is adequate and upside for algos is limited Fundamental – more domain knowledge necessary – equity long short 1/3 of AUM, fundamental signals at the core of the model – value – some version of cheapness. Analyst estimate earnings or trailing. But with new data, there are ways to look at earnings with new data sources – credit card data – Netflix, etc Interesting applications
  2. When AI researchers come to finance, need to rethink AI are black box models When you have functional forms, assumptions are cleaner and relationships are clear Not enough data to adapt to non-stationary
  3. Need to remove clicks
  4. Use the above template as a starting point for your disclosure page(s). Product-specific risk disclosure may be obtained on fact sheets, or product web pages. Regarding footnotes: It is NOT permissible to run footnotes together in large blocks of print. If disclosure is in a footnote, separate or number the footnotes so they can be read. Therefore, footnotes must be at least 8-pt font, and in the same font-type used in the majority of the presentation. Using smaller-type fonts, such as Calibri or Arial Narrow, is not permitted.