Name: Ryan Goverdhan Sharma Candidate Number: 8168

To what extent could stock analysts become obsolete in the presence of Artificial Intelligence?

Contents
Abstract....................................................................................................................... 2
Introduction................................................................................................................. 4
Why I chose to explore this topic.....................................................................................4
Definitions of key and correlating terminology in within the question.........................4
What I aim to achieve by the end of this report.............................................................5
Artificial Intelligence.................................................................................................... 7
The different branches of Artificial Intelligence and their elaborations.......................7
Machine Learning...........................................................................................................7
Neural Networks.............................................................................................................8
Expert Systems...............................................................................................................8
Robotics...........................................................................................................................8
Natural Language Processing......................................................................................8
Fuzzy Logic..................................................................................................................... 8
Overview on the implications and usage of AI within the financial industry...............10
Explaining the implications of AI within the financial industry and the stock market
............................................................................................................................................ 10
How the different branches of AI are used to predict market fluctuations and
trends.................................................................................................................................10
Machine Learning (ML)................................................................................................10
Neural Networks...........................................................................................................11
Expert Systems.............................................................................................................12
Robotics.........................................................................................................................12
Natural Language Processing....................................................................................12
Fuzzy Logic................................................................................................................... 13
Case Studies: How Artificial Intelligence has become a rising force within the
financial industry and the stock market.....................................................................14
Norway’s $1.4tn wealth fund calls for state regulation of AI (Martin, 2023).............14
JPMorgan Chase & Co.’s ChatGPT-like software for investment selection............14
Case Studies: Why AI won’t beat the stock market any better than the analysts......16
The Flash Crash of 2010................................................................................................ 16
The failure of Knight Capital Group’s trading algorithms............................................16

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Name: Ryan Goverdhan Sharma Candidate Number: 8168

Ethical concerns of AI intervention in the stock market.............................................18

Job Loss............................................................................................................................ 18
Data privacy and security concerns..............................................................................18
Algorithmic bias................................................................................................................18
Conclusion – Will stock traders become obsolete because of AI?............................20
Bibliography.............................................................................................................. 21

Abstract
“Stock market volatility is back, continuing a longer-term trend toward wilder swings
in prices…The most recent burst of volatility stems from problems in banking and the
broader economy.” (Sonenshine, 2023). This clearly illustrates that the economy is
as volatile as ever, stocks declining and surging unpredictably. As new technologies
arise, aiming to create less ambiguity within the markets, reduce investment
uncertainties and understand the how’s and when’s of market fluctuations, some
occupations, corresponding to these emerging technologies, could become obsolete,
“about 60 percent of occupations, at least one-third of the constituent activities could
be automated, implying substantial workplace transformations and changes for all
workers.” (James Manyika, 2017). The sheer ubiquity of Artificial Intelligence and its
correlating benefits is a major indicator for large corporations and governments to
make AI its central investment; subsequently, this is the case. “The global AI market,
valued at 142.3 billion U.S. dollars as of 2023, continues to grow driven by the influx
of investments it receives. This is a rapidly growing market, looking to expand from
billions to trillions of U.S. dollars in market size in the coming years. From 2020 to
2022, investment in startups globally, and in particular AI startups, increased by five
billion U.S. dollars, nearly double its previous investments, with much of it coming
from private capital from U.S. companies. The most recent top-funded AI businesses
are all machine learning and chatbot companies, focusing on human interface with
machines.” (Thormundsson, 2023). Artificial Intelligence is slowly taking over the
world, I am intrigued to know at what extent it will do this. The reasons as to why
Artificial Intelligence has received an ever-growing popularity are exceedingly
extensive; however, it is important to note that this popularity per se is not always
positive, in some cases it has been negative. Although types of AI (these types
mentioned will be explained in detail later) such as Large Language Models (LLMs)

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and Machine Learning (ML) are able to process and analyse immense amounts of
data linking to stocks and shares and the patterns and correlations of such data, at
an unthinkably fast rate (subsequently, being advantageous to corporations and
even governments), this advantage comes with the grave social cost of the loss of
occupations within the industry. Amid the widespread concerns of Artificial
Intelligence “stealing” jobs, there has been many articles stating that a good deal of
occupations will be newly possessed by AI. In this report I will analyse how Artificial
Intelligence has been integrated into the stock market by financial institutions, and
how it is threatening to certain occupations within the financial sector, specifically the
role of the stock analyst. I will observe how the different branches of AI technology
have been and are being used within the stock market, and what institutions are
currently using this technology, and also to what extent has this technology been
successful.

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Name: Ryan Goverdhan Sharma Candidate Number: 8168

Introduction
Why I chose to explore this topic.
I chose to explore the stock market, analysts/traders, Fintech (financial technology)
and the affect that Artificial Intelligence will have on these, as I am truly enamoured
by the intricacies and sophistications of economics and the global economy along
with my curiosity for the future. I am eager to investigate the extent to which such
inventions and innovations, like AI, will either holistically improve the global economy
or harm it. Looking to the recent proliferation of financial technology, or Fintech, I am
particularly keen to expand my research through this report, and through the title of
this report I hope to broaden my knowledge of the involvement of AI within the stock
market and to what extent will AI take jobs and what jobs (specifically within the
financial sector) will it possess.

Definitions of key and correlating terminology in within the question

Throughout the majority of the report there will be a substantial amount of
terminology linked to the title that may have been unheard of by yourself, the reader,
and in order to fully understand the whole context, it might be important to familiarise
yourself with some of these words. I will now be explaining each word along with the
context in which it will be used in within this report.

Stock Analysts: “Stock analysts research and review a company’s financial

information and give advice to help investors make informed decisions. Using market
prices and financial results, they may make recommendations regarding elements
that could affect the company's stock price, portfolio and future earnings. Stock
analysts may also evaluate the market performance of a company or industry and
share the information they uncovered with the relevant authorities,” (Indeed Editorial
Team, 2023). In simpler terms, a stock analyst is someone who analyses the
finances of a company via scrutinising their financial statements and tracking and
tracing their investment data history; they do this to predict the financial outcomes of
firms and give advice to their clients on these firms and stocks, so that their clients
can make investments with more confidence and certainty, as they have an
increased amount of knowledge into what they are investing into.

The Stock Market: “The stock market is a constellation of marketplaces where

securities like stocks and bonds are bought and sold. Stock markets provide you with

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Name: Ryan Goverdhan Sharma Candidate Number: 8168

easy, transparent access to investment assets, and they help professional investors
determine fair prices for public companies. Think of the stock market as the main
financial venue where investing happens. It’s a collection of all the places where
matches are made between buyers and sellers trading shares of public companies.
“The stock market” and “Wall Street” can refer to the entire world of securities trading
—including stock exchanges where the shares of public companies are listed for
sale and markets where other securities are traded. The New York Stock
Exchange is the biggest stock market on earth. Market indexes like the S&P 500 and
the Dow Jones Industrial Average aggregate the prices of groups of stocks, which
indicate the day-to-day performance of the stock market as a whole.” (Curry, 2023)
Essentially, the stock market is a place where public limited companies (PLCs) can
list shares of their company, so that investors (anyone over the age of 18) will inject
cash into the company and will (hopefully) see a return on their investment; if a
company does financially well then, their share price will go up and therefore the
investor holding a share or shares in the firm will profit from this.

Artificial Intelligence: “A wide-ranging branch of computer science concerned with

building smart machines capable of performing tasks that typically require human
intelligence.” (Schroer, 2023). In simpler terms, AI or Artificial Intelligence is a
machine that replicates human behaviour and human intelligence. Within this report,
I will expand on this definition and will explain how this definition adapts to the
findings in my research.

Fintech (Financial Technology): “Used to describe new technology that seeks to

improve and automate the delivery and use of financial services. At its core, fintech
is utilized to help companies, business owners, and consumers better manage their
financial operations, processes, and lives. It is composed of specialized software
and algorithms that are used on computers and smartphones.” (Kagan, 2023)
Simply, fintech is an innovation of new technology that seeks to automate financial
services and financial processes, with the core focus of increasing efficiency to
essentially optimise output.

What I aim to achieve by the end of this report.

By the end of this report, I aim to have given the reader a perspicuous understanding
of the following areas: AI on a whole, the role of stock analysts within the stock

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Name: Ryan Goverdhan Sharma Candidate Number: 8168

market and the usage of AI in the stock market and the financial sector; I would then
like to zoom out into the actual topic and use all of these sub-topics to help broaden
the understanding of whether or not AI can replace stock analysts. I think that by
honing into the sub-topics and giving the reader all the relevant information to aid
and develop their understanding, it will help them to understand the topic of the
report. I also hope to captivate any readers that could build on this report who wish
to pursue further research in this field.

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Name: Ryan Goverdhan Sharma Candidate Number: 8168

Artificial Intelligence
Artificial Intelligence is a very broad field that encompasses various branches and
subfields, with each field focusing on different aspects of creating state-of-the-art,
intelligent machines and systems.

The different branches of Artificial Intelligence and their elaborations.

Via multiple sources (all of which will be named within this section) there are six main
branches of AI: Machine Learning (ML), Neural Networks, Expert Systems, Robotics,
Natural Language Processing and Fuzzy Logic.

Machine Learning
Machine Learning is, “a branch of artificial intelligence (AI) and computer science
which focuses on the use of data and algorithms to imitate the way that humans
learn, gradually improving its accuracy.” (IBM, n.d.). Machine Learning is an
important and unique branch of AI as it enables an increase in performance via
learning from past experiences. Machine Learning extracts knowledge from data
sets, therefore, the more knowledge extracted the more effective the process is.
However, the limitation of ML is that “the predictions made by ML systems can only
be as good as the data on which they have been trained.” (Qualcomm Technologies,
Inc., n.d.).

There are four types of machine learning algorithms (IBM, n.d.):

Supervised Machine Learning – Machines are trained using labelled datasets to train
algorithms to classify data or predict outcomes accurately.

Unsupervised Machine Learning – Uses machine learning algorithms to analyse and

cluster unlabelled datasets. These algorithms discover hidden patterns or data
groupings without the need for human intervention. This method’s ability to discover
similarities and differences in information make it ideal for exploratory data analysis,
cross-selling strategies, customer segmentation, and image and pattern recognition.
It’s also used to reduce the number of features in a model through the process of
dimensionality reduction.

Semi-supervised learning –Uses a smaller labelled data set to guide classification

and feature extraction from a larger, unlabelled data set. Semi-supervised learning

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can solve the problem of not having enough labelled data for a supervised learning
algorithm.

Reinforcement Machine Learning – This model learns as it goes by using trial and
error. A sequence of successful outcomes will be reinforced to develop the best
recommendation or policy for a given problem.

Neural Networks
Neural networks are, “a set of algorithms, modelled loosely after the human brain,
that are designed to recognise patterns.” (Nicholson, n.d.). Neural networks learn
from data so they can do things such as classifying data aligning to characteristics
and forecast future events (a very useful skill that can be used in the stock market).

Expert Systems
An Expert System is, “a computer program that uses artificial intelligence (AI)
technologies to stimulate the judgement and behaviour of a human or an
organisation that has expertise and experience in a particular field.” (Lutkevich, n.d.).
Expert systems work hand-in-hand with humans, they are complementary to
humans, they are not a replacement of human experts.

Robotics
“Robotics is a branch of AI, which is composed of electrical engineering, mechanical
engineering and computer science for designing, construction, and application of
robots.” (Tutorials Point, n.d.). Robotic machines are built to perform human tasks
without further human intervention.

Natural Language Processing

“Natural Language Processing (NLP) refers to AI method of communicating with an
intelligent system using a natural language such as English. Processing of Natural
Language is required when you want an intelligent system like robot to perform as
per your instructions.” (Tutorials Point, n.d.). Natural Language Processing gives
computers the ability to understand text and speech in the same us humans can.
Fuzzy Logic
“Fuzzy logic takes into consideration all of an issue’s ambiguities, where there could
be additional alternative values beyond a binary True and False. This is hugely
useful in artificial intelligence, which needs to be more intuitive, adaptive and human-
like than traditional machine operations.” (Techfunnel, 2023). Essentially, fuzzy logic
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Name: Ryan Goverdhan Sharma Candidate Number: 8168

gives more than a Boolean yes (1) or no (0) solution to a problem. Below shows an
example of a fuzzy logic problem.

(Techfunnel, 2023)

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Name: Ryan Goverdhan Sharma Candidate Number: 8168

Overview on the implications and usage of AI within the financial industry

Artificial Intelligence is having a major effect on the economy, purely due to its ever-
growing ubiquitous nature, more and more companies are investing in AI technology.
“New AI statistics show that 35% of companies are using AI and 42% of companies
are exploring AI for its implementation in the future.” (Zauderer, 2023)

Explaining the implications of AI within the financial industry and the stock market
Artificial Intelligence has become a transformative force in the stock market, and it is
revolutionising the way that businesses are working. It is also being used and
adapted within Wall Street, “Well-renowned companies on Wall Street such as
Goldman Sachs and Morgan Stanley have started to focus on narrow AI solutions
through data mining, natural language processing, and using self-learning algorithms
tools, which are capable of interacting faster than our daily use applications like the
Google Assistant of Android, Alexa of Amazon and Siri of Apple.” (Chowdhury,
2019). This clearly depicts how AI is becoming ever more evident in the financial
industry, as these large investment banks using AI will influence the industry into
doing so as well. The main usage of AI within the stock market is the utilization of
Algorithmic trading (short form is ‘algo’ trading). “Algorithmic trading is the practice of
purchasing or trading security according to some prescribed set of rules tested on
past or historical data. These sets of rules are based on charts, indicators, technical
analysis or stock essentials.” (Mishra, n.d.). According to an article in The Journal of
Finance, one of the most consequential technological innovations are, financial
investors are manoeuvring computer systems to mechanize their stock trading
processes. The main implications and reasons as to why many large firms, hedge
funds, asset managers etc. are now using automation, in the form of LLMs, AI and
ML is because they have the ability to identify patterns in the market, that cannot be
easily recognised to the human eye, and this gives them an edge in predicting
market trends and making increasingly profitable trades.

How the different branches of AI are used to predict market fluctuations and trends.
Machine Learning (ML)
As mentioned previously, ML is a unique branch of Artificial Intelligence that is used
to increase performance via learning through past experiences. Machine learning
extracts knowledge from large datasets, hence the more data extracted and
analysed, the more accurate the output will be. Machine learning is being
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Name: Ryan Goverdhan Sharma Candidate Number: 8168

increasingly used throughout the whole of the financial industry, e.g., AI/ML is used
to identify risks based on historical data and will thus give a probability statistic for
the output of investments. Specifically, in the stock market, algorithmic trading is an
example of machine learning, “Machine Learning algorithms are extremely helpful in
optimizing the decision-making process of humans because they manoeuvre data
and forecast the forthcoming market picture with terrific accuracy. Based on these
predictions, the traders can take timely actions and maximize their returns. We know
that trading is often influenced by human emotions, which is a great stumbling block
in the way of optimal performance. Algorithms and computer programs make
decisions quicker than humans and without the influence of external factors such as
emotions.” (Rafia, n.d.). This shows how ML can be advantageous to investment
firms, because it shows how the emotion is taken out of trading. This source also
mentions companies that have incorporated ML into their trading systems, one of
which is Morgan Stanley – a world renowned investment bank and financial services
company. It mentions how Morgan Stanley uses ML, “Morgan Stanley is a
multinational investment bank and financial services company that leverages robo
advisors powered by machine learning to assist investors in managing their wealth.
The machine learning algorithms help investors to make better and informed
decisions based on real-time data.” (Rafia, n.d.). This is how ML is used in stock
trading, it takes the historical data, trends and fluctuations of stocks to give traders
the optimal output to their investments.

Neural Networks
Neural networks learn from data so they can do things such as classifying data
aligning to characteristics and forecast future events. A paper, published by the
University of Cambridge, on the utilization of, “feed-forward deep neural network
(DNN) to forecast the index price of the Singapore stock market using the FTSE
Straits Time Index (STI) in t days ahead is proposed and tested through market
simulations on historical daily prices.” (Bang Xiang Yong, n.d.).

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Name: Ryan Goverdhan Sharma Candidate Number: 8168

Expert Systems
As mentioned previously, expert systems are a branch of Artificial Intelligence that
mimics human behaviour and judgement. These systems use information from
humans or organisations that are experts in a particular field. Using this information,
expert systems can be adapted to be used in the stock market by taking knowledge
from humans or firm and making a value judgement based on this knowledge. They
can also make predictions based on the expertise of firms or organisations.

Robotics
“Robotics is a branch of AI, which is composed of electrical engineering, mechanical
engineering and computer science for designing, construction, and application of
robots.” (Tutorials Point, n.d.). Through this definition we can see that robots can be
used in the stock market to automate processes such as buying and selling stocks at
a faster and more efficient rate. Robots are taking over the stock market and
automating many processes, this attracts a huge number of firms. Robotics now,
“dominates global markets, with 60%-73% of equities trading in the U.S. alone.”
(Fabino, 2023).

Natural Language Processing

“Natural Language Processing (NLP) refers to AI method of communicating with an
intelligent system using a natural language such as English. Processing of Natural
Language is required when you want an intelligent system like robot to perform as
per your instructions.” (Tutorials Point, n.d.). Natural Language Processing models,
like ChatGPT for example, can be used in the stock market as ChatGPT can be
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Name: Ryan Goverdhan Sharma Candidate Number: 8168

used to analyse and summarise news articles to give analysts and traders a less
elusive prediction of the trend of the market at that point in time.

Fuzzy Logic
Fuzzy logic takes into consideration all of an issue’s ambiguities, where there could
be additional alternative values beyond a binary True and False. (Techfunnel, 2023).
Here we can see how fuzzy logic can be used in the stock market, as it can reduce
the risk of investments for analysts/traders because it involves human emotions
whilst also correctly manipulating data using statistics.

(Honnappa, 2020)

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Name: Ryan Goverdhan Sharma Candidate Number: 8168

Case Studies: How Artificial Intelligence has become a rising force within the
financial industry and the stock market.
We have seen how the different branches of AI have been used within the stock
market and we will now see how corporations and governments have already
incorporated AI.

Norway’s $1.4tn wealth fund calls for state regulation of AI (Martin, 2023)
This source is about an interview between the CEO of Norway’s $1.4tn wealth fund,
Nicolai Tangen and reporters from the Financial Times. Nicolai Tangen is seen to be
an advocate for the usage of Artificial Intelligence, as he urges the state to speed up
the regulations surrounding AI, “The head of the world’s largest sovereign wealth
fund has called on governments to speed up the regulation of artificial intelligence as
it revealed it would set guidelines for how the 9,000 companies it invests in should
use AI “ethically”.” This wealth fund owns on average 1.5% of every globally listed
company, also it is important to include that they are big investors in tech companies
such as Apple and Microsoft. This source was written on April 28th, 2023, on August
16th, 2023, another source was published, and it’s titled, “Norway wealth fund makes
$143bln profit as AI surge lifts tech”. Within this writing it mentions that, “The fund is
also urging companies it invests in to develop and use AI responsibly.” It then goes
on to mention, “Tech is the largest sector among the fund's equity investments,
representing 11.9% of the its total value at end-2022.” (Fouche, 2023). This shows
how Artificial Intelligence has been influenced within the stock market and how it is
becoming a ubiquitous, rising force. In light of this information, it is evident how
influential AI has become with respect to the stock market, and how some jobs can
become obsolete as a result of these machines. This source shows how firms are
profit maximisers, as they are not acting ethically by promoting the usage of AI,
knowing that occupations could be lost.

JPMorgan Chase & Co.’s ChatGPT-like software for investment selection

“Over the past ten years or so, a handful of corporate and investment banks have
developed a genuine competitive edge through judicious use of traditional AI. Now,
the race is on to do so again with an even more transformative technology.” (Carlo
Giovine, 2023). The type of AI that this is referring to is gen AI, which is short for
generative AI, an example of gen AI is ChatGPT, which is a large language model.
Holistically, a generative AI system is one which can produce text, images and other
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Name: Ryan Goverdhan Sharma Candidate Number: 8168

types of media, they do this by constantly learning from previous inputs, they then
use these previous inputs and data produced by these inputs to generate new data.
“Generative artificial intelligence (AI) could well be one of the most transformative
technologies for the investment banking industry. Deloitte predicts that the top 14
global investment banks can boost their front-office productivity by as much as 27%–
35% by using generative AI. This would result in additional revenue of US$3.5 million
per front-office employee by 2026.” (Sriram Gopalakrishnan, 2023)

(Carlo Giovine,
2023)

An example of an investment bank that has already started to use Artificial

Intelligence, with regards to automating investment and analysation, is JPMorgan
Chase & Co. They are currently developing a ChatGPT-like software service that
selects investments for their customers, a role previously occupied by stock analysts,
and financial advisors. “JPMorgan Chase is developing a ChatGPT-like software
service that leans on a disruptive form of artificial intelligence to select investments
for customers, CNBC has learned. The company applied to trademark a product
called IndexGPT this month, according to a filing from the New York-based bank.
IndexGPT will tap “cloud computing software using artificial intelligence” for
“analysing and selecting securities tailored to customer needs,” according to the
filing.” (Son, 2023)

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Name: Ryan Goverdhan Sharma Candidate Number: 8168

Case Studies: Why AI won’t beat the stock market any better than the analysts.
We will now look at the other side of the argument and how Artificial Intelligence is
not always destined for success within the stock market, and how it can lead to a
subsequent failure. This is a broad explanation as to how algo-trading is not always
destined for success, “AI systems may lack the ability to incorporate nuanced human
judgment and emotional intelligence into stock market decision-making processes.
This can lead to a purely data-driven approach that overlooks significant qualitative
factors that impact stock prices.” (Paul, 2023)

The Flash Crash of 2010

The Flash Crash of 2010 was a rapid and extreme market downturn that occurred in
approximately 36 minutes. It saw trillions of US Dollars crash within the stock market.
“Stock indices, such as the S&P 500, Dow Jones Industrial Average and Nasdaq
Composite collapsed and rebounded very rapidly.” (Wikipedia, n.d.). AI driven
trading systems operated without sufficient human oversight during the flash crash,
and this meant that these algorithms lacked the emotional intelligence to detect and
stabilise this erratic behaviour within the market. This lack of human intervention
meant that different trading algorithms that operated over different stock exchanges
within North America were uncoordinated. The Flash Crash was also caused by
High-Frequency Traders (HFTs). “High-frequency trading (HFT) is a type
of algorithmic trading in finance characterized by high speeds, high turnover rates,
and high order-to-trade ratios that leverages high-frequency financial data and
electronic trading tools.” (Wikipedia, n.d.). “Regulators found that high frequency
traders exacerbated price declines. Regulators determined that high frequency
traders sold aggressively to eliminate their positions and withdrew from the markets
in the face of uncertainty.” (Wikipedia, n.d.) This amplifies a significant Artificial
Intelligence failure in the stock market, and how human intervention was required in
order to stabilise the erratic behaviour, because it was evident that these machines
lacked the emotional intelligence to do so. This case study could be looked at by
firms and they could see this as a deterring factor of algo-trading and the usage of
Artificial Intelligence.

The failure of Knight Capital Group’s trading algorithms

Knight Capital Group was a major market-making firm that uses AI-driven trading
algorithms, and with its high frequency trading algorithms (see the above paragraph
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Name: Ryan Goverdhan Sharma Candidate Number: 8168

for the definition) it was the largest trader in U.S. equities. An ‘algorithmic computer
glitch’ cost Knight Capital $440 million, in a matter of minutes, they were losing $10
million a minute. “The problem on Wednesday led the firm’s computers to rapidly buy
and sell millions of shares in over a hundred stocks for about 45 minutes after the
markets opened. Those trades pushed the value of many stocks up, and the
company’s losses appear to have occurred when it had to sell the overvalued shares
back into the market at a lower price. The company said the problems happened
because of new trading software that had been installed. The event was the latest to
draw attention to the potentially destabilizing effect of the computerized trading that
has increasingly dominated the nation’s stock markets.” (Popper, 2012) This is
another example of a significant AI failure, as it shows that if given too much and it
goes slightly wrong it has a detrimental effect. It is a case where the algorithm lacks
to mimic ‘human-like’ behaviour, instead it behaved erratically and rogue.

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Name: Ryan Goverdhan Sharma Candidate Number: 8168

Ethical concerns of AI intervention in the stock market

The integration of AI in the stock market has undoubtedly brought about several
ethical considerations and externalities that need to be carefully addressed some of
these include concerns about the impact on the workforce, the data security and
privacy concerns, and algorithmic bias. Here I will address some of the key ethical
considerations and externalities of AI usage in the stock market.

Job Loss
Previously mentioned, the increasing usage of AI in the stock market has the
potential to automate various tasks which are normally performed by human traders,
analysts and other financial professionals that are associated with the stock market.
Artificial Intelligence technology has already started being integrated by huge
financial institutions such as, “Goldman Sachs, JPMorgan Chase, and Barclays, to
make better investment decisions.” (Jordan, 2023). Furthermore, “by 2025, the
McKinsey Global Institute predicts that 75% of jobs in finance will be replaced by AI.”
(Jordan, 2023).

Data privacy and security concerns

When a financial institution integrates AI technology, it means that they allow a mass
collection and analysation of sensitive financial data. This financial data could
include investor behaviour, the volume of trades made in a specific time period and
market trends. Also, in light of this statement, the use of AI in the stock market could
bring about new cybersecurity risks that could lead to a potential manipulation of the
market or fraudulent transactions, both of which would reduce investor trust. It has
also been reported that, “Over 75% of consumers are concerned about
misinformation from AI.” (Haan, 2023), this shows how the integration of AI can lead
to a loss in trust from investors.

Algorithmic bias
Algorithmic bias is, “a phenomenon that occurs when an algorithm produces results
that are systemically prejudiced due to erroneous assumptions in the machine
learning (ML) process.” Simply put, algorithmic bias is a repeatable error in a
computer system (derived from the ML process) that create a prejudiced, unfair
outcome. This algorithmic bias can lead to unfair, unethical advantages for certain
market participants, for example, if a large financial institution, which has a mass

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Name: Ryan Goverdhan Sharma Candidate Number: 8168

amount of data for the ML process, integrates Artificial Intelligence in the process of
stock analysation and stock trading, then it is unfair and for smaller institutions or
even individuals that are unable to integrate AI due to the high costs or other
outstanding factors.

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Name: Ryan Goverdhan Sharma Candidate Number: 8168

Conclusion – Will stock traders become obsolete because of AI?

In conclusion, this title has provided a comprehensive exploration of Artificial
Intelligence intervention within the stock market and to what extent they can make
analysts obsolete; and after having deeply scrutinised a plethora of sources I have
made a conclusion on the title of this report. The power that AI has gained over the
past 2-3 decades in the financial industry has become increasingly evident. There
have been many circumstances as to how and when artificial intelligence has been a
vital asset for firms and governments in the stock market, but there have also been
times where AI has failed. The main reasons as to why AI stock trading algorithms
(algo traders) could be labelled a ‘valuable asset’ to businesses in the financial
sector is due to the fact that they can process and analyse data much more quickly
than a human can, it considers past events and then forecasts what will happen
within the market if a trend is recognised. However, there has been numerous cases
where these machines have failed due to a lack of human intelligence or emotional
intelligence. The ubiquity of artificial intelligence is nothing short of outstanding, with
currently around 85% of financial services organisations using some form of artificial
intelligence, with 64% being mass adopters of AI. (Rauch, 2023). After having
analysed many sources, I have come to the theoretical conclusion that stock
analysts will not become obsolete in the presence of artificial intelligence, but
instead, as these machine learning models get increasingly accurate at making
predictions based on data, the role of analysts will become more specialised.

Bibliography
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Name: Ryan Goverdhan Sharma Candidate Number: 8168

1. Bang Xiang Yong, M. R. A. R. A. S. A., n.d. A Stock Market Trading System

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Name: Ryan Goverdhan Sharma Candidate Number: 8168

8. Honnappa, S., 2020. Understanding Stock predictions-ML, Sentiment

Analysis & Fuzzy Logic. [Online]
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gained: What the future of work will mean for jobs, skills, and wages. [Online]
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15. Lutkevich, B., n.d. Expert System. [Online]

Available at: https://www.techtarget.com/searchenterpriseai/definition/expert-
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Name: Ryan Goverdhan Sharma Candidate Number: 8168

system#:~:text=An%20expert%20system%20is%20a,%2C%20not
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16. Martin, R. M. a. K., 2023. Norway’s $1.4tn wealth fund calls for state
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18. Mishra, S., n.d. ARTIFICIAL INTELLIGENCE IN THE STOCK MARKET:

HOW DID IT HAPPEN?. [Online]
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19. Nicholson, C. V., n.d. A Beginner's Guide to Neural Networks and Deep
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21. Popper, N., 2012. Knight Capital Says Trading Glitch Cost It $440 Million.
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22. Qualcomm Technologies, Inc., n.d. Data collection and pre-processing

techniques. [Online]
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Name: Ryan Goverdhan Sharma Candidate Number: 8168

Available at: https://developer.qualcomm.com/software/qualcomm-neural-

processing-sdk/learning-resources/ai-ml-android-neural-processing/data-
collection-pre-processing
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23. Rafia, n.d. Applications of Machine Learning Algorithms for Trading. [Online]
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%20terrific%20accuracy.

24. Rauch, S., 2023. AI Sees a Big Payday in the Financial Services Industry.
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26. Sonenshine, J., 2023. The Stock Market Is Extra Erratic Now. How That
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27. Son, H., 2023. JPMorgan is developing a ChatGPT-like A.I. service that gives
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28. Sriram Gopalakrishnan, V. S. A. C., 2023. Unleashing a new era of

productivity in investment banking through the power of generative AI.
[Online]

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Name: Ryan Goverdhan Sharma Candidate Number: 8168

Available at: https://www2.deloitte.com/us/en/insights/industry/financial-

services/financial-services-industry-predictions/2023/generative-ai-in-
investment-banking.html
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29. Techfunnel, 2023. World Logic Day: Understanding Fuzzy Logic and its Role
in Artificial Intelligence. [Online]
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30. Thormundsson, B., 2023. AI corporate investment worldwide 2015-2021.

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%20companies%20are%20using%20AI%20and%2042%25%20of
%20companies,in%20the%20United%20States%20alone

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Name: Ryan Goverdhan Sharma Candidate Number: 8168

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