Hi! You’re reading AI Street, a weekly newsletter about how AI is reshaping Wall Street. I’m Matt Robinson and every Thursday I share the latest news, analysis and AI research for investors.

The Rundown

• Outsmarting the Market with AI: An interview with Dr. Lopez-Lira

• FinTech Raises $36 million For AI-Driven Data Management for Investors

• Index Ventures Raises $2.3 Billion for Tech Investments

• More AI & Finance News

• FidoGPT: Decoding Dog Barks with AI

Q&A

AI Street interviewed Dr. Alejandro Lopez-Lira, a finance professor at the University of Florida and author of the book “The Predictive Edge: Outsmart the Market using Generative AI and ChatGPT in Financial Forecasting” out today.

The book explains how to use artificial intelligence and large language models (LLMs) to find investment ideas, improve trading strategies and increase efficiency.

Lopez-Lira has been at the forefront of AI and finance, publishing a research paper last year on ChatGPT’s ability to predict stock returns based on news headlines. Lopez-Lira and his co-author, Yuehua Tang, asked ChatGPT to decide how a headline would affect a company’s stock price with a short prompt:

Forget all your previous instructions. Pretend you are a financial expert. You are a financial expert with stock recommendation experience. Answer “YES” if good news, “NO” if bad news, or “UNKNOWN” if uncertain in the first line. Then elaborate with one short and concise sentence on the next line. Is this headline good or bad for the stock price of X company?

ChatGPT produced statistically significant results that outperformed traditional sentiment models despite it not having any explicit financial training.

The study, which has been downloaded more than 60,000 times, landed Lopez-Lira his first book deal and garnered interest from multiple news outlets, major hedge funds, and the U.S. Securities and Exchange Commission.

This interview has been edited for clarity and length.