Artificial Intelligence: Road to the Smart Future

Kemy Huang  This article was written by Kemy Huang – Research Analyst at I Know First

Summary:

  • Earlier times, AI had been particularly slow to develop with periodic booms in research. However over the past decade, due to the digital world transforming into the data world, the promising leaps to surpass traditional computing power, and some businesses start to make fortune from the technique. Based on those reasons lead to the AI boom
  • The innovation in the AI area shows the great potential of how powerful it could be. Nowadays, the example in AlphaGo showed the milestone of AI that it doesn't need to be constrained by the limits of human knowledge
  • The technique of Artificial intelligence can bring a fortune to the market. I Know First the promising company that could upgrade investment decisions by providing effective forecasting solutions for the investors

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The Conceptual Framework of Applying ML and AI Models to Analyze and Forecast Financial Assets

This article was written by:

Sergey Okun  Sergey Okun – Financial Analyst at I Know First, Ph.D. in Economics.


Eugen KalaidinEugene Kalaidin – Professor, Dept. of Mathematics and Computer science, The Financial University under the Government of the Russian Federation, Ph.D., D. Sci. (Habilitation) in Physics and Mathematics.

Highlights:

  • Knowledge significantly decreases the speculative risk of investment
  • ML and AI technologies allow us to get relevant knowledge about the financial market
  • Information asymmetry is a key factor in getting the arbitrage return
  • Models of nonlinear dynamic systems allow correctly to evaluate financial assets by determining the backbone behavior of assets

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Machine Learning Hedge Fund: Artificial Intelligence, Algotrading and Hedge Funds

taliTali Soroker is a Financial Analyst at I Know First.

Machine Learning Hedge Fund


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What Is An Artificial Neural Network And How I Know First Is Using It?

The article was written by Hieu Nguyen, a Financial Analyst at I Know First.

Artificial Neural Network and I Know First

Summary:

  • Artificial Neural Network Definition – word by word
  • How does Artificial Neural Network work?
  • Application of ANN in real life
  • How ANN transforms the financial market?
  • Artificial Neural Network and I Know First

You come to the office today like every other day, sit down, grab a cup of coffee, and start reading the news. The more you read, the more you realize there are some words that show up more often “Artificial Intelligence”, “Artificial Neural Network”, “Deep Learning”. A decade ago, no one talked about these concepts. You start to ask yourself “What is all of these?” How’re they going to change my world?”

Artificial Neural Network Definition – word by word

Undoubtedly, Artificial Neural Network (ANN) has turned the page of the computer science. Let’s first understand what ANN is.

Network refers to “a system consisting of many similar nodes that connect together by edges to allow movement or communication between or along parts”. One of the most common example of network is the World Wide Web. Web pages represent the nodes and the hyperlinks between them represent edges. As a result, one page can link the one other using the hyperlink. Another example is our social network. Everyone is a node and our relationship are the edge that connect us.

Neural Network: similar to other networks, neural network consists of nodes that connect with each other. The phrase was first used in neuroscience to describe how our brain, the most sophisticated system in the world, works. Our brain has about 100 billion neurons, connecting with each other by synapses. In fact, a child’s brain has a quadrillion of connections, 10 times the connections of the entire Internet. As we grow up, our brain starts pruning the unnecessary connections and strengthening the others. Thus, we are able to learn new things of the world. The same terminology is applied in computer science.

Artificial Neural Network: As we understand more about how effective our brain is in learning new things, scientists have developed the artificial neural network that replicates our brain. Artificial Neural Network has changes the whole computer science industry from a conventional computer to an artificial intelligence computer. Thanks to the new tech, our computers now can perform sophisticate tasks that have never been experienced before.

(Source: wikimedia commons)

How does Artificial Neural Network work?

Artificial Neural Network consists of three types of layer: input layer, hidden layers, and one or more output layers. The main function of the ANN is to build a model that identifies patterns and makes decisions without human intervention. To perform the task, the raw materials (dataset) is imported to the input layer. Then, the data is passed down to the nodes in each of the hidden layers. Finally, the result will appear in the output layer.

What makes ANN different with the conventional program is backpropagation. This algorithm allows the model to adjust the weight of each node and recognize the most accurate pattern. The precision of the model is presented by a cost function, which is a measure of how wrong the model is in term of estimating the relationship between two variables.

The goal of the backpropagation algorithm is to minimize the “cost” of the model by changing the weight and bias of each node. To do so, we have to calculate the gradient of the cost function, which shows the directions to reduce the cost function the most. After adjusting the weight, the model can recognize an efficient pattern to apply in the future.

Application of ANN in real life

Artificial Neural Network seems sophisticated, but does it really work in real life? You may not realize but the application of ANN is every where around you.

Look at your phone. Siri and Google Assistant is one of the apps that use ANN to recognize your voice command and perform the task. In fact, Google has used 1.2 billion gigabytes of data to train Google Assistant. As a result, Google Assistant now can convert a voice command (input) to a text command (output) and then perform the task.

Another application of ANN is face recognition. It’s such a surprise of how accurate Facebook can recognize our friends in a photo. Currently, the face recognition technology can accurately analyze our emotions. The latest product that includes face recognition technology is iPhone X, whose Face ID can allow us to unlock the phone

It will be unfair not to mention self-driving cars. Thanks to Artificial Intelligence in general and ANN in particular, self-driving car now can find the lane on the road using colors, edges, and gradients. Moreover, the car also uses a deep neural network to draw a boundary with the other vehicles and obstacles on the road and make its own decision of whether to accelerate, break, or turn.

(Source: wikimedia commons)

How ANN transforms the financial market?

Artificial Intelligence and ANN also make a huge difference in financial market. In financial market, the data has been collected decades ago. A large amount of data is truly meaningful to train the model. Currently, many big financial institutions have applied AI in their business

One example is fraud detection using by credit cards companies. Late last year, Mastercard introduced a new security platform, Decision Intelligence, that uses AI to improve the accuracy of real-time approvals. The new platform will reduce the fraud probabilities. Hence, it not only reduces the loss on fraud, but also promotes customers to purchase more often.

Besides that, banks are also using AI to predict which customers have higher probability of default or cancel service. Moreover, Bank of America also launches an AI bot on the smartphone app to learn about the customer behaviors and offer suitable financial services.

ANN and I Know First

Although there are a lot of applications of AI and ANN both in real life and in financial market, there has not been a true model that has been effectively built to forecast the market. Many may believe that it is impossible to predict the market, it may turn out to be the opposite with I Know First’s algorithm.

We truly understand that stock market is a chaotic process, which is predictable, rather than a random process. The stock market is driven by three paradigms: Stability, Memory, and Sudden and Drastic Changes. Details are discussed in “Machine Learning Trading, Stock Market, and Chaos”.

Understanding the underlying concepts of the stock market, Dr. Lipa Roitman, the founder and CTO of I Know First, then developed a predictive algorithm based on Artificial Intelligence and Machine Learning with elements of Artificial Neural Networks incorporated in it. The model is trained with 15 years of historical data as well as real-time data. Then I Know First will test the prediction algorithm on years of market data, and validate them with the 2-month recent data to avoid overfitting. Every day, new data is recorded and the system will adjust itself based on the results that it achieved in the past and the new inputs.

For 5 years, I Know First’s algorithm has proved its effectiveness in beating the stock market. The success of I Know First one more time proves how Artificial Intelligence is changing our life as well as the financial market.

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Adobe Stock Forecast: Tech Giant Beats Expectation Boosting Price 28%

NicoleThis Adobe stock forecast article was written by Nicole Shammay – Analyst at I Know First.

Summary:

  • Adobe's Q2 results beat estimates up 23% from the year-ago quarter
  • Hedge funds piled into Adobe's stock and experienced a return of 13.9%   
  • DCF support around $735, a 28% upside for the Adobe stock forecast on a one-year horizon

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I Know First Weekly Review Algorithmic Performance: June 23rd, 2021


I Know First Weekly Newsletter
Investment Selection Using AI Predictive Algorithm
June 23, 2021

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I Know First To Democratize AI-Driven Stock Predictions For All

I Know First Research Team LogoThis article was written by the I Know First Research Team.

Summary:

  • Artificial intelligence is being widely used by pig players on the investment scene.
  • While the technology has a lot to offer, advanced models trained by top investment banks are likely to stay out of the reach of broader audience.
  • It is up to ambitious startups like I Know First to democratize AI for all.

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AI Stock Market Forecast – How to Spot Great Market Opportunities in The New Market Realm?

motek 1The stock prediction article was written by Tianyue Yu, Analyst at I Know First, Master's candidate at Brandeis University.

Summary:

  • AI technology is gaining attention in the stock market
  • Quantitative trading supported by machine learning fits the features of the post-pandemic market well
  • I Know First's AI predictive algorithm can provide investors with timely forecasts across various asset classes and regions

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