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February 13, 2020 08:41 pm

Robot Analysts Outwit Humans on Investment Picks, Study Shows

They beat us at chess and trivia, supplant jobs by the thousands, and are about to be let loose on highways and roads as chauffeurs and couriers. Now, fresh signs of robot supremacy are emerging on Wall Street in the form of machine stock analysts that make more profitable investment choices than humans. From a report: At least, that's the upshot of one of the first studies of the subject, whose preliminary results were released in January. Buy recommendations peddled by robo-analysts, which supposedly mimic what traditional equity research departments do but faster and at lower costs, outperform their flesh-and-blood counterparts over the long run, according to Indiana University professors. "Using this type of technology to make investment recommendations or to conduct investment analyses is going to become increasingly important," Kenneth Merkley, an associate professor of accounting and one of the authors, said by phone. Whether getting stock calls right is a critical mission of human analysts is debatable. Wall Street research departments serve a variety of functions, among them connecting investors with company executives and gathering earnings and other corporate data. While their buy, sell and hold recommendations still garner attention and can move stocks, the number of clients premising investment decisions off them is probably limited. The study looked at a small and still largely experimental branch of fintech, firms founded on the premise that digital technology does a better job than humans in making equity recommendations. While all analysts use computers, a handful of start-ups has been seeing if programs can handle every aspect of the stock-picking process.

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