Group Co.
A.I. on the Fast Track
Traders Magazine Online News, October 23, 2018
When the stock market plunged 1300 points in two days on Oct. 10th and 11th, many analysts scrambled to reconcile the market turmoil with U.S. companies reporting strong corporate earnings. While U.S. stocks roared back in subsequent sessions on healthy earnings from banks and tech stocks, the surge in volatility adds to uncertainty about the U.S. economy.
Was this market rout a one-time event, or did it portend the start of volatile price swings caused by rising interest rates and worries about U.S. trade disputes with China?
In the future, analysts will consult artificial intelligence software to crunch big data, find historical precedents, and run statistics to predict what lies ahead, all within a few minutes.
Increasingly analysts and portfolio managers are turning to A.I.-based technologies such as machine learning to figure out the impact of events on stocks and other financial assets.
One has to look no further than Kensho, an artificial intelligence and machine learning company that has been dubbed the Siri of Wall Street by Forbes. The A.I. software uses big data to analyze new events, answer questions, produce reports, and predict where markets may be heading.
Kensho has focused on solutions for the buy-and sell-sides that help traders and other people make sense of market-moving events, or news happening in the world. “It answers the question: what statistically happened when that thing happened before,” said Adam Broun, president and COO in an interview.
To enable this analysis, Kensho built a comprehensive organized history of events and timelines including corporate actions, earnings, mergers, macro-events, weather, politics and geopolitical events, trade events, disputes, and military events.
“If it’s an earnings event or a conference or new product launch or a hurricane, you want a timeline of previous similar events that you can do statistics against,” said Broun.
Based on its models, the system can identify when there is a statistical or causal effect.
For example, say a trader owns stock in Southwest Airlines, but Delta Airlines and Alaska Airlines are reporting their earnings this week. Kensho’s models might identify that Delta’s earnings are having a strong statistical effect on Southwest’s stock price and alert the trader to pay attention to Delta’s earnings, but at the same time find no effect from Alaska Airline’s earnings.
Last March, Kensho was acquired by S&P Global for $550 million, in an eye-popping deal that underscored the future of A.I. in finance.
Founded in 2013, Kensho has already made inroads at Goldman Sachs, one of its investors, where it helped sales traders answer questions from institutional clients.
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