15+ min read
3 Real-Life Examples of How AI Transforms Financial Research
July 28, 2022
5 min read
Information is more plentiful than ever before. In the past two years alone, 90% of the world’s information was created, according to IBM. Presumably, this massive production of data should make financial research easier. However, searching for impactful insights has only become more challenging.
Most of the information being produced today is largely unstructured, coming in the form of research reports, video, news articles, and transcripts—data that requires time to sift through. The manual research processes analysts have followed for decades have become time-consuming as the number of documents and data sources needing to be analyzed increases exponentially.
Many analysts and firms are experiencing information overload, leaving them struggling to capture every relevant data point. The solution to this problem?
AI in financial research is critical for firms to realistically leverage all of the data available to them, and AI-powered solutions are already transforming the way financial research is conducted across the industry.
The Role of AI in Financial Research
The immediate question that comes to mind with regards to AI is always: won’t AI replace analysts? Though this question is common, our answer is no, it will not. AI is great at automating repeatable tasks at scale and executing tirelessly on specific functions they’re trained to handle.
What AI cannot do is replicate the human ability to process knowledge, create context, and pull nuanced insights from hard data.
Forward-thinking firms are working to create AI-augmented analysts who utilize AI tools to enhance research processes and insights. Rather than eliminating the job of the analyst, AI is elevating their potential to contribute strategically and play a more integral role in actual decision making within a firm.
To accomplish this, firms must invest in AI-powered financial research solutions. But while 90% of investment firms are actively applying AI to front-office research processes, only 16% have implemented advanced applications of AI with results that can be directly tied back to its use.
So how do firms truly leverage AI to enhance financial research?
Sifts Through Millions of Documents at Scale
Smart search technology makes it possible for AI tools to read documents with a human-like capability, but at a rapid speed and extensive scale. Natural language processing (NLP) can identify subtle shifts in conversation and changes in language over time. AI algorithms can sort results for relevance and weight them based on where or how frequently keywords appear or even the proximity of multiple keywords to each other within a document.
On a daily basis, Avi Bharadwaj, a Principal at Innovation Endeavors, is evaluating industry trends to inform investment decisions. Before he started using AlphaSense, he spent a bulk of his time doing high-level Google searches, toggling between various data providers, and raking through multiple internal drives to gather research. But using the platform has dramatically changed his day-to-day work life.
Bharadwaj noted, “With AlphaSense, I can do 2-3x the amount of work in the same amount of time that I could do before.”
For analysts, these tools are invaluable for processing vast amounts of data and still delivering under deadline. During earnings season, AI tools can analyze earnings call transcripts for relevant information and deliver insights at a scope not possible with manual research, allowing for real-time adjustment of forecasts and theses.
Expands Search Capabilities with Synonym Recognition
More often than not, there is a natural variance in the language we use for a specific word. For example, the word “equities” is interchangeable with assets, securities, shares, or holdings in a search. Because of this variance, it’s not possible to capture every relevant data source with a single keyword search.
Smart Synonyms technology automatically expands searches to include synonyms for the search terms used. This can significantly cut down research time by eliminating the need for repetitive searches and decreasing the possibility that important information will be missed because a particular keyword search wasn’t conducted.
“The beauty of AlphaSense is that it automates that process,” Howard Mason, Payments Analyst at RenMac, shares in our case study, How AI Automates An ‘Onerous’ Equity Research Process. “You can search across a variety of sources in parallel and then the AI will surface the best matches based on your search query.” With AlphaSense, Howard can surface what every bank is saying about digital currencies, in seconds and feel confident that AI has captured the most relevant sources.
Mitigate Risk with Effective Monitoring and Centralization
The amount and speed at which unstructured data is being published increases the risk of overlooking critical information. Even when entire teams are assigned to collecting, analyzing, and distributing information related to a particular initiative, manual processes run the risk of oversight.
AI research platforms mitigate this risk by aggregating multiple content sets, sorting for relevancy, and using NLP and other smart search capabilities to extract the most relevant and important information in one centralized place.
For Alexander Tijan, an Analyst at Richardson Wealth, the investment in AlphaSense quickly paid off. In order to successfully navigate earnings seasons and keep up with the pace of the market, he sought a solution that would allow him to automate much of his research process and access all the documents he needed within one platform. “Having everything in one place is a game-changer,” he noted. Beyond the centralization of the platform, he noted how much easier earnings season has become, “This earnings season was huge using AlphaSense. It took a matter of minutes to go through a company and get smart, quick.”
Volatility is a constant reality today, which is why it is important to have a continued understanding of changing market forces and the ability to observe and forecast trends.. Coupled with the increased speed at which technology is advancing and changing industry landscapes, it’s clear why manual human assessment can no longer remain the status quo.
On the AlphaSense platform, you can tap into thousands of premium business data sources — indexed, searchable, and all in one place. Learn more and start your free 2-week trial today.
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