Can Machines Learn Finance?
While the concept of Machine Learning may be widespread in many industries and environments, its role in finance has not yet been concretely defined. Asset managers have benefitted from certain Machine Learning principles, but in some areas the existing research has only scratched the surface.
Finance poses unique challenges even for the most powerful Machine Learning programs, but the use of these tools could potentially improve portfolios. For example, managers could leverage Machine Learning to measure the state of the economy, subsequently adjusting portfolio positioning, model interpretation or risk management.
To provide clarity, we highlight some key differentiators between financial Machine Learning and typical computer programming and define commonly-used terms in the space.
In this video introduction, AQR's Head of Machine Learning Bryan Kelly explains what machine learning is and how it's being used in finance.
Machine Learning’s “enormous success” refers to its growth in the industry, not any specific success of investment returns.