Can AI beat a naive portfolio? An experiment with anonymized data

IF 7.4 2区经济学 Q1 BUSINESS, FINANCE

Finance Research Letters Pub Date : 2025-03-11 DOI:10.1016/j.frl.2025.107126

Marcelo S. Perlin, Cristian R. Foguesatto, Fernanda M. Müller, Marcelo B. Righi

引用次数: 0

Abstract

Using anonymized data from the United States (U.S.) market, we evaluate the performance of Google’s main LLM (Large Language Model) Gemini 1.5 Flash in making investment decisions. Unlike other studies, we query the LLM for different investment horizons (1 to 36 months) and types of financial information (financial data, price data, and a combination of both). Running a total of 30,000 simulations for 1,522 companies over 20 years of data, we find that Gemini does not consistently outperform a naive portfolio and the S&P 500 index in terms of returns and Sharpe ratios. Additionally, our findings indicate a decline in risk adjusted investment performance as the investment horizon extends.

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来源期刊

Finance Research Letters BUSINESS, FINANCE-

CiteScore

11.10

自引率

14.40%

发文量

863

期刊介绍： Finance Research Letters welcomes submissions across all areas of finance, aiming for rapid publication of significant new findings. The journal particularly encourages papers that provide insight into the replicability of established results, examine the cross-national applicability of previous findings, challenge existing methodologies, or demonstrate methodological contingencies. Papers are invited in the following areas: Actuarial studies Alternative investments Asset Pricing Bankruptcy and liquidation Banks and other Depository Institutions Behavioral and experimental finance Bibliometric and Scientometric studies of finance Capital budgeting and corporate investment Capital markets and accounting Capital structure and payout policy Commodities Contagion, crises and interdependence Corporate governance Credit and fixed income markets and instruments Derivatives Emerging markets Energy Finance and Energy Markets Financial Econometrics Financial History Financial intermediation and money markets Financial markets and marketplaces Financial Mathematics and Econophysics Financial Regulation and Law Forecasting Frontier market studies International Finance Market efficiency, event studies Mergers, acquisitions and the market for corporate control Micro Finance Institutions Microstructure Non-bank Financial Institutions Personal Finance Portfolio choice and investing Real estate finance and investing Risk SME, Family and Entrepreneurial Finance