GPT-4 outsmarts Wall Street: AI predicts earnings better than human analysts

“Researchers recently explored whether OpneAI’s GPT-4 could analyse financial statements as effectively as human analysts. Their findings were surprising: GPT-4 was capable of predicting changes in company earnings more accurately than human analysts.”

“The researchers conducted their study by providing GPT-4 with standardised financial statements, carefully stripped of any company names or dates to prevent the model from using prior knowledge. To mimic the process human analysts typically follow, they used special prompts to guide GPT-4 through the analysis step-by-step. This approach ensured that GPT-4’s analysis was as close to human reasoning as possible.”

“Using data from the Compustat database, covering the years 1968 to 2021, the researchers compared GPT-4’s performance with human analysts’ predictions from the IBES database. The results were telling. With the step-by-step prompts, GPT-4 achieved a prediction accuracy of 60.35 per cent, significantly higher than the 52.71 per cent accuracy of human analysts. Moreover, GPT-4’s F1-score, which balances the accuracy and relevance of predictions, also outperformed that of the human analysts.”