Generative AI for Sector-Based Investment Portfolios
Analysis
This paper explores the application of Large Language Models (LLMs) from various providers in constructing sector-based investment portfolios. It evaluates the performance of LLM-selected stocks combined with traditional optimization methods across different market conditions. The study's significance lies in its multi-model evaluation and its contribution to understanding the strengths and limitations of LLMs in investment management, particularly their temporal dependence and the potential of hybrid AI-quantitative approaches.
Key Takeaways
- •LLMs can enhance stock selection and interpretability in investment management.
- •LLM portfolio performance is market-dependent, showing strong performance in stable markets but struggling in volatile ones.
- •Combining LLM-based stock selection with traditional optimization techniques improves portfolio outcomes.
- •Hybrid AI-quantitative frameworks show promise for more robust and adaptive investment strategies.
Reference
“During stable market conditions, LLM-weighted portfolios frequently outperformed sector indices... However, during the volatile period, many LLM portfolios underperformed.”