GPT-4 Is Better Than Humans at Financial Forecasting, New Study Shows The findings could upend the financial services industry.

By matthew fox

Key Takeaways

  • OpenAI's GPT-4 is better than humans at analyzing financial statements and making forecasts, according to a new study.
  • "Even without any narrative or industry-specific information, the LLM outperforms financial analysts in its ability to predict earnings changes," the study found.
  • Trading strategies based on GPT-4 also delivered more profitable results than the stock market.
Johannes Simon/Getty Images via Business Insider
Human-shaped robot Ameca of Engineered Arts interacts with visitors on July 6, 2023, in Geneva, Switzerland.

This article originally appeared on Business Insider.

OpenAI's GPT-4 proved to be a better financial analyst than humans, according to a new study.

The findings could upend the financial services industry that, like other business sectors, is racing to adopt generative AI technologies.

According to the study conducted by the Booth School of Business at the University of Chicago, the large language model did a better job of analyzing financial statements and making predictions based on those statements.

"Even without any narrative or industry-specific information, the LLM outperforms financial analysts in its ability to predict earnings changes," the study said. "The LLM exhibits a relative advantage over human analysts in situations when the analysts tend to struggle."

The study utilized "chain-of-thought" prompts that directed GPT-4 to identify trends in financial statements and calculate different financial ratios. From there, the large language model analyzed the information and predicted future earnings results.

"When we use the chain of thought prompt to emulate human reasoning, we find that GPT achieves an accuracy of 60%, which is remarkably higher than that achieved by the analysts," the study said. The human analysts were closer to the low 50% range with regard to prediction accuracy.

The large language models' ability to recognize financial patterns and business concepts with incomplete information suggests that the technology should play a key role in financial decision-making going forward, according to the study's authors.

Finally, the study found that applying GPT-4's financial acumen to trading strategies produced more profitable trading, with higher share ratios and alpha that ultimately beat the stock market.

"We find that the long-short strategy based on GPT forecasts outperforms the market and generates significant alphas and Sharpe ratios," the study said.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Leadership

Lead From the Top: 5 Core Responsibilities of a CEO

Knowing exactly what the chief executive's role entails is critical for steering a company to success.

Business News

Here's How the CEO of the Biggest Bank in the U.S. Spends His Downtime: 'This Gives Me Purpose in Life'

JPMorgan CEO Jamie Dimon, 69, recently said that his top three priorities are his family, his country, and his purpose, which is working at the bank — in that order.

Side Hustle

This 29-Year-Old's Side Hustle Brought People 'to the Dark Green Side.' It Made $10,000 Within 2 Days and Sees 6 Figures a Month.

Nikki Seaman began work on her business when the pandemic led to grocery store shutdowns.

Side Hustle

How to Build Endless Passive Income With This Simple Online Hustle

Autopilot stores aren't just income streams. They are passports to freedom, flexibility and finally working and living on your own terms.

Business Ideas

70 Small Business Ideas to Start in 2025

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2025.

Health & Wellness

This Is the Newest Real Estate Trend You Can't Miss — and It's Worth $438 Billion

A rapidly emerging new trend is sweeping the global real estate sector, powered by humanity's collective desire for longer lives and healthier lifestyles. Here's what entrepreneurs should pay attention to to capture the new market.