The recent history of large language model in investment and portfolio management: is it a revolution in finance?

Abstract

Purpose ChatGPT gained significant attention around the world, reinforcing the interaction between humans and sophisticated computer programs. The effects of this technology on people’s quality of life are multifaceted, and a key area of debate is how it affects the natural human need for creativity. Recent advancements in large language models (LLMs) have motivated numerous studies to evaluate the use of ChatGPT in the context of investment strategies and portfolio management, particularly taking into account the complex and dynamic nature of financial market data. Considering this overview, the purpose of this research is to conduct a literature review to explore the recent history of artificial intelligence (AI) in investment, asset pricing and portfolio management. Design/methodology/approach To develop this literature review, the papers were selected from Scopus and Web of Science databases. Findings LLMs, in general, and ChatGPT, in particular, are transforming the way researchers can conduct studies in the field of finance, as well as the way individuals, firms and investment teams can analyze large amounts and diverse types of financial data to support investment strategies and portfolio management. The results suggest that while LLMs mark a relevant milestone in the history of finance, it still has some limitations. Practical implications Investors and financial institutions can use the results of this paper to understand how AI can support financial data analysis. Originality/value This research summarizes key contributions of studies addressing LLMs to the literature, with a particular focus on its applications in investments and portfolio management.

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