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Quantifying Qualitative Insights: Leveraging LLMs to Market Predict

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  • Hoyoung Lee
  • Youngsoo Choi
  • Yuhee Kwon

Abstract

Recent advancements in Large Language Models (LLMs) have the potential to transform financial analytics by integrating numerical and textual data. However, challenges such as insufficient context when fusing multimodal information and the difficulty in measuring the utility of qualitative outputs, which LLMs generate as text, have limited their effectiveness in tasks such as financial forecasting. This study addresses these challenges by leveraging daily reports from securities firms to create high-quality contextual information. The reports are segmented into text-based key factors and combined with numerical data, such as price information, to form context sets. By dynamically updating few-shot examples based on the query time, the sets incorporate the latest information, forming a highly relevant set closely aligned with the query point. Additionally, a crafted prompt is designed to assign scores to the key factors, converting qualitative insights into quantitative results. The derived scores undergo a scaling process, transforming them into real-world values that are used for prediction. Our experiments demonstrate that LLMs outperform time-series models in market forecasting, though challenges such as imperfect reproducibility and limited explainability remain.

Suggested Citation

  • Hoyoung Lee & Youngsoo Choi & Yuhee Kwon, 2024. "Quantifying Qualitative Insights: Leveraging LLMs to Market Predict," Papers 2411.08404, arXiv.org.
  • Handle: RePEc:arx:papers:2411.08404
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    References listed on IDEAS

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    1. Frédy Pokou & Jules Sadefo Kamdem & François Benhmad, 2024. "Hybridization of ARIMA with Learning Models for Forecasting of Stock Market Time Series," Computational Economics, Springer;Society for Computational Economics, vol. 63(4), pages 1349-1399, April.
    2. Qianqian Xie & Weiguang Han & Yanzhao Lai & Min Peng & Jimin Huang, 2023. "The Wall Street Neophyte: A Zero-Shot Analysis of ChatGPT Over MultiModal Stock Movement Prediction Challenges," Papers 2304.05351, arXiv.org, revised Apr 2023.
    3. Shijie Wu & Ozan Irsoy & Steven Lu & Vadim Dabravolski & Mark Dredze & Sebastian Gehrmann & Prabhanjan Kambadur & David Rosenberg & Gideon Mann, 2023. "BloombergGPT: A Large Language Model for Finance," Papers 2303.17564, arXiv.org, revised Dec 2023.
    4. Hongyang Yang & Xiao-Yang Liu & Christina Dan Wang, 2023. "FinGPT: Open-Source Financial Large Language Models," Papers 2306.06031, arXiv.org.
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