Artificial Intelligence in Asset Management

73 Pages Posted: 8 Mar 2020 Last revised: 10 Sep 2020

See all articles by Söhnke M. Bartram

Söhnke M. Bartram

Warwick Business School - Department of Finance; Centre for Economic Policy Research (CEPR)

Jürgen Branke

University of Warwick - Operational Research & Systems (ORS) Subject Group

Mehrshad Motahari

University of Cambridge - Judge Business School

Multiple version iconThere are 3 versions of this paper

Date Written: December 27, 2019

Abstract

Artificial intelligence (AI) has a growing presence in asset management and has revolutionized the sector in many ways. It has improved portfolio management, trading, and risk management practices by increasing efficiency, accuracy, and compliance. In particular, AI techniques help construct portfolios based on more accurate risk and returns forecasts and under more complex constraints. Trading algorithms utilize AI to devise novel trading signals and execute trades with lower transaction costs, and AI improves risk modelling and forecasting by generating insights from new sources of data. Finally, robo-advisors owe a large part of their success to AI techniques. At the same time, the use of AI can create new risks and challenges, for instance as a result of model opacity, complexity, and reliance on data integrity.

Keywords: Artificial intelligence, algorithmic trading, portfolio management, risk management, robo-advisors, machine learning, LASSO, neural networks, deep learning, decision trees, random forests, SVM, cluster analysis, genetic algorithms, NLP

JEL Classification: G11, G17

Suggested Citation

Bartram, Söhnke M. and Branke, Jürgen and Motahari, Mehrshad, Artificial Intelligence in Asset Management (December 27, 2019). WBS Finance Group Research Paper, CFA Institute Research Foundation 2020, Available at SSRN: https://ssrn.com/abstract=3510343 or http://dx.doi.org/10.2139/ssrn.3510343

Söhnke M. Bartram (Contact Author)

Warwick Business School - Department of Finance ( email )

Coventry, CV4 7AL
United Kingdom
+44 (24) 7657 4168 (Phone)
+1 425 952 1070 (Fax)

HOME PAGE: http://go.warwick.ac.uk/sbartram/

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Jürgen Branke

University of Warwick - Operational Research & Systems (ORS) Subject Group ( email )

United Kingdom

Mehrshad Motahari

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

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