Here’s some major mundane utility, huge if true: Automatically analyze headlines for their implications for stock prices, get there first and earn a 500% return
I read the article about this and their assumptions are insane. Normally stock news happens after the market closes. The way returns on the next day are calculated is just (end of day price for the day)/(end of day on the previous day). It is importantly not (end of day)/(opening price) of the stock. This is why stocks are able to very frequently open up many percentage points due to news happening overnight.
So, all they did was say based on the news we will get long if chatGPT says good and get short if chatGPT says bad, and the way we will calculate our returns is just whatever the returns for the next day are. But remember returns for the next day are based on the close for the previous day. So, they are assuming that if news comes out at 6pm they are able to buy or sell the relevant stock at exactly the 4pm closing price. This is a fucking insane assumption. Not only are markets very thin in the extended 4pm-8pm hours and pre open 4am-9:30am hours. But responding to news during non core trading hours (any time not 9:30-4:00) is already an extremely standard thing that hedge funds do. So yes this would be true if there was some magical market maker that was willing to market make at unlimited size in either direction without doing any fading in response to news or someone trading against them during the normally very thin non core trading hours.
I read the article about this and their assumptions are insane. Normally stock news happens after the market closes. The way returns on the next day are calculated is just (end of day price for the day)/(end of day on the previous day). It is importantly not (end of day)/(opening price) of the stock. This is why stocks are able to very frequently open up many percentage points due to news happening overnight.
So, all they did was say based on the news we will get long if chatGPT says good and get short if chatGPT says bad, and the way we will calculate our returns is just whatever the returns for the next day are. But remember returns for the next day are based on the close for the previous day. So, they are assuming that if news comes out at 6pm they are able to buy or sell the relevant stock at exactly the 4pm closing price. This is a fucking insane assumption. Not only are markets very thin in the extended 4pm-8pm hours and pre open 4am-9:30am hours. But responding to news during non core trading hours (any time not 9:30-4:00) is already an extremely standard thing that hedge funds do. So yes this would be true if there was some magical market maker that was willing to market make at unlimited size in either direction without doing any fading in response to news or someone trading against them during the normally very thin non core trading hours.
Now we don’t have to read it! Not all heroes wear capes.