Tuesday, May 21, 2013

Meet Watson, Your New Investment Advisor

Yahoo Finance reported last month that researchers from the University of Warwick had found that data gleaned from Google word searches could be used to predict stock market movements.

Here's an excerpt from article:

... {University of Warwick researcher Tobias} Preis and his colleagues have turned to broader search trends to try to predict the whole stock market's movements. Using publicly available data on search terms from Google Trends, the researchers tracked 98 terms, many of them finance- or economics-related, such as "debt," "crisis" and "derivatives" from 2004 to 2011. They then compared the searches to the closing prices of the Dow Jones Industrial Average, a major stock-market index....

The reasoning behind the game was simple. If people get anxious about the stock market, they will likely seek out information on financial issues before trying to dump their stock. Thus, finance-related Google searches should go up before a stock market decline.

That's exactly what the researchers found: An uptick in Google searches on finance terms reliably predicted a fall in stock prices.


I also understand that the researchers are now testing their methodology in real time, and are predicting market movements for the week ahead.

So far, at least, they have been uncannily accurate.

But it doesn't end there.  This morning's papers report that IBM is attempting to integrate its supercomputer Watson in helping businesses in responding to customer, including the financial services industry.

Here's an excerpt from Forbes:

ANZ Bank is going to start deploying Watson at its private wealth group, beginning with insurance offerings. “Imagine if you could sit down with an adviser and, in the time it takes to make a cappuccino, Watson will pull up all of your accounts, read all the fine print, and tell you what kinds of insurance protection you’re missing or where you’re overcovered,” says Joyce Phillips, CEO of ANZ’s global wealth and private banking group. ANZ first discussed the idea with IBM a year ago. Phillips, frustrated by the lack of innovation in the private wealth business, is most looking forward to using Watson to capture a new customers’ financial picture in an informal Q&A session to avoid the hassles of making them fill out a personal financial statement. If a customer signs up with the bank, Watson can theoretically monitor all the changes to the bank’s products and assimilate and correlate them with a client’s financial picture. Skeptics will scream this is a death knell for the human investment adviser, but a good adviser would be happy to get that kind of back-office help.


All of this reminds me eerily of the movie 2001: A Space Oddity.  In the movie an on-board supercomputer name HAL attempts to take control of a spaceship, only to be thwarted in the end.

But the concept of HAL now seems to becoming a reality in the workplace.