Humans are bad at predictions. We’re emotional, we have biases, and we often shortchange research and analytics to go with our ‘gut feeling’ instead. There’s an old saying in economics, coined by former Federal Reserve Chairman Alan Greenspan, that the Federal Reserve has “accurately predicted nine of the last five recessions.”
Predictions are not our strong suit, yet business and investment decision-making often rely heavily on them. A CEO’s forecast for sales in a given quarter can impact everything from inventory to new hires, to the earnings forecasts made by analysts on Wall Street. For investors, our decision on how to invest, what types of securities to purchase, and how to allocate our portfolio – all of these decisions rely in great part on our predictions for what will happen in the future.
In short, in business and investment, we place a lot of emphasis on our ability to predict the future, which ultimately means we critically rely on one of our greatest weaknesses.
A.I.’s Economic Benefit: Lower the Cost – and Boost the Accuracy – of Prediction
Professor Ajay Agrawal, who teaches at the University of Toronto’s Rotman School of Management and founded a company called the Creative Destruction Lab, argues that A.I.’s single most transformative and important economic function is its ability to lower the cost of prediction.
Here’s an example Professor Agrawal offers to provide context. Consider Amazon’s recommendation engine, which in and of itself is a prediction application of A.I. Professor Agrawal’s team found Amazon’s tool to be about 5% accurate, meaning that out of every 20 items it recommends you buy, you buy one of them but not the other 19. While that sounds like a pretty low level of accuracy, one must also consider that Amazon picked those 20 items out of the millions upon millions of items in its vast catalog. On that basis, the tool is pretty darned good.
Every day, engineers and data scientists in Amazon’s machine-learning group are working to get those numbers higher, better. As the prediction tool becomes more accurate, perhaps we’ll end up buying 3 or 4 of the items in the recommended list of 20, increasing the economic value of the A.I. and also the revenue and profit model of the business.
The same logic and value-add apply to the investment world. Humans all too often let our emotions and biases play an outsized role in our forecasts for the markets, and that in turn affects our investment decision-making. Artificial Intelligence can remove the emotion completely from the equation, and it can also process more data in seconds than a human could in a year. With research, analytics, back-testing, and statistics, the A.I. can make a market prediction based on data. Humans simply cannot compete.
If You’re Wondering When A.I. Will Start Making Market Predictions…
Guess what – it already is. Hedge funds and large institutional investors have been using Artificial Intelligence to analyze large data sets for investment opportunities, and they have also unleashed A.I. on charts to discover patterns and trends. Not only can the A.I. scan thousands of individual securities and cryptocurrencies for patterns and trends, and it generates trade ideas based on what it finds. Hedge funds have had a leg-up on the retail investor for some time now.
Not anymore. Tickeron has launched a new investment platform, and it is designed to give retail investors access to sophisticated AI for a multitude of functions:
And much more. No longer is AI just confined to the biggest hedge funds in the world. It can now be accessed by everyday investors. Learn how on Tickeron.com.
AMZN moved below its 50-day moving average on April 24, 2024 date and that indicates a change from an upward trend to a downward trend. In of 52 similar past instances, the stock price decreased further within the following month. The odds of a continued downward trend are .
The 10-day RSI Indicator for AMZN moved out of overbought territory on April 12, 2024. This could be a bearish sign for the stock. Traders may want to consider selling the stock or buying put options. Tickeron's A.I.dvisor looked at 45 similar instances where the indicator moved out of overbought territory. In of the 45 cases, the stock moved lower in the following days. This puts the odds of a move lower at .
The Momentum Indicator moved below the 0 level on April 17, 2024. You may want to consider selling the stock, shorting the stock, or exploring put options on AMZN as a result. In of 78 cases where the Momentum Indicator fell below 0, the stock fell further within the subsequent month. The odds of a continued downward trend are .
The Moving Average Convergence Divergence Histogram (MACD) for AMZN turned negative on April 16, 2024. This could be a sign that the stock is set to turn lower in the coming weeks. Traders may want to sell the stock or buy put options. Tickeron's A.I.dvisor looked at 48 similar instances when the indicator turned negative. In of the 48 cases the stock turned lower in the days that followed. This puts the odds of success at .
Following a 3-day decline, the stock is projected to fall further. Considering past instances where AMZN declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
The Stochastic Oscillator shows that the ticker has stayed in the oversold zone for 5 days. The price of this ticker is presumed to bounce back soon, since the longer the ticker stays in the oversold zone, the more promptly an upward trend is expected.
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where AMZN advanced for three days, in of 334 cases, the price rose further within the following month. The odds of a continued upward trend are .
AMZN may jump back above the lower band and head toward the middle band. Traders may consider buying the stock or exploring call options.
The Aroon Indicator entered an Uptrend today. In of 289 cases where AMZN Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are .
The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating well-balanced risk and returns. The average Profit vs. Risk Rating rating for the industry is 92, placing this stock slightly better than average.
The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating steady price growth. AMZN’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is significantly overvalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: AMZN's P/B Ratio (8.953) is slightly higher than the industry average of (3.732). P/E Ratio (59.886) is within average values for comparable stocks, (59.569). Projected Growth (PEG Ratio) (2.164) is also within normal values, averaging (1.921). Dividend Yield (0.000) settles around the average of (0.026) among similar stocks. P/S Ratio (3.171) is also within normal values, averaging (10.201).
The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to worse than average earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows
a provider of on-line retail shopping services
Industry InternetRetail