(Generative) AI in Financial Economics
Saïd Business School, University of Oxford
Saïd Business School, University of Oxford
A comprehensive review of the burgeoning literature on the intersection of artificial intelligence and finance
This review article synthesizes the burgeoning literature on the intersection of (generative) artificial intelligence (AI) and finance. We organize our review around six key areas:
The emergent role of generative AI, especially large language models (LLMs), as analytic tools, external shocks to the economy, and autonomous economic agents
Corporate finance, focusing on how firms respond to and benefit from AI
Asset pricing, examining how AI brings novel methodologies for return predictability, stochastic discount factor estimation, and investment
Household finance, investigating how AI promotes financial inclusion and improves financial services
Labor economics, analyzing AI's impact on labor market dynamics
The risks and challenges associated with AI in financial markets
We conclude by identifying unanswered questions and discussing promising avenues for future research.
Exploring the role of LLMs as analytic tools, economic shocks, and autonomous agents in financial markets.
How firms respond to and benefit from AI technologies in their financial operations and decision-making.
Novel AI methodologies for return predictability, stochastic discount factor estimation, and investment management.
AI's role in promoting financial inclusion and improving financial services for consumers.
Analyzing AI's impact on labor market dynamics, employment, and workforce transformation.
Emerging risks, methodological limitations, and policy implications of AI in financial markets.
AI could raise global GDP by 7%, amounting to approximately $7 trillion, and increase US productivity growth by 1.5 percentage points annually over the next decade according to Goldman Sachs projections.
Both the number of AI-related papers and top journal publications in financial economics increased sixfold from 2018 to 2024, demonstrating the field's rapid expansion.
Leading researchers forecast that transformative AI capable of performing most cognitive tasks at or above human level could emerge within the next decade.
Download the complete 131-page review paper on AI in Financial Economics