Are robot analysts indeed now better than humans at picking stocks? This could be a laughable question but according to a recent study, robot analysts seem to be yielding massive profits of stock recommendation than human research analysts.
The study shows reports issued by seven Robo-analyst companies between 2003 and 2018 of 76,568 examined by the researchers and published their preliminary findings back in January.
In their findings, they found out that portfolios based on the buy recommendations of Robo-analysts performed better than those of human analysts. This suggests that Robo-analysts’ buy recommendations are more profitable than those of human analysts.
More so, the Robo-analysts produce a more collective balanced distribution of buy, hold, and sell recommendations and are less likely to rely on companies’ periodic earnings reports when carrying out their analysis. They also work by pouring out reams of data released in the firm’s annual reports unlike their human counterpart
Although Robo-analysts and Robo-advisers are similar, Robo-analysts dive into the Securities and Exchange Commission (SEC) to analyze companies’ finances while Robo-advisers perform tasks like determining and communicating asset allocation strategies based on questionnaires carried out with investors.
The question is should financial analysts be worried about losing their job? One thing is that Robo-analysts do not perform better than human analysts when it comes to selling recommendations. The Indiana study found “no evidence” to indicate that Robo-analysts’ sell recommendations are incrementally more profitable than those of human analysts.
The study was conducted by the University of Indiana and also shows how far investors actually respond to Robo-analysts – and found that investors do not appear to incorporate and trade on the signals provided by their recommendation revisions.
Is it safe to say that robots analysts are now better than humans at picking stock but do not perform any better than human analyst when it comes to selling recommendations