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Financial Statement Analysis with Large Language Models

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Re: Financial Statement Analysis with Large Language Models

#101

Post by doctoboggan »

oceanplexian wrote: post #97
doctoboggan wrote: post #38

If this were to become widely used, I can imagine executives writing financial statements, running them through an LLM, and tweaking it until they get the highest predicted future outcome. This would make the measure almost immediately useless.

This is already how it works. Have you listened to an earnings call? Especially companies like Tesla? They are a dog and pony show to sell investors on the stock.

I am not saying executives aren't currently trying to game the system. I am saying currently the best they can do is estimate how thousands of analysts will respond. If LLM analysts become wide spread then they would be able to run simulations in a feedback loop until their report is optimized.

Re: Financial Statement Analysis with Large Language Models

#102

Post by BobaFloutist »

bongodongobob wrote: post #58
BobaFloutist wrote: post #50

Earlier quoted context omitted.

I think I could probably make more money selling a tool or strategy that consistently, reliably makes ~2% more than government bonds than I could make off it myself, with my current capital.

Lol try it and get back to us.

Well, see, I don't actually have a method for that. But if I did, I think my capital is low enough that I'd have more success selling it to other people than trying to exploit it myself, since the benefit would be pretty minimal if I did it with just my own savings, but could be pretty dramatic for, say, banks.

Re: Financial Statement Analysis with Large Language Models

#103

Post by flourpower471 »

posting_mess wrote: post #60
bethekind wrote: post #24

Earlier quoted context omitted.

Do you use llama 3 for your work?

No hedge fund registered before the last 2 weeks will use Llama3 for their "prod work" beyond "experiments". Quant trading is about "going fast" or "being super right", so either you'd need to be sitting on some huge llama.cpp/transformer improvement (possible but unlikely) or its more likely just some boring math applied faster than others. Even if they are using a "LLM", they wont tell you or even hint at it - "eff…

Well I work in prop trading and have only ever worked for prop firms- our firm trades it's own capital and distributes it to the owners and us under profit share agreements - so we have no incentive to sell ourselves as any smarter than the reality.

Saying it's all high school math is a bit of a loaded phrase. "High school math" incorporates basically all practical computer science and machine learning and statistics.

If I suspect you could probably build a particle accelerator without using more math than a bit of calculus - that doesn't make it easy or simple to build one.

Very few people I've worked with have ever said they are doing cutting edge math - it's more like scientific research . The space of ideas is huge, and the ways to ruin yourself innumerable. It's more about people who have a scientific mindset who can make progress in a very high noise and adaptive environment.

It's probably more about avoiding blunders than it is having some genius paradigm shifting idea.

Re: Financial Statement Analysis with Large Language Models

#104

Post by zjaffee »

posting_mess wrote: post #60
bethekind wrote: post #24

Earlier quoted context omitted.

Do you use llama 3 for your work?

No hedge fund registered before the last 2 weeks will use Llama3 for their "prod work" beyond "experiments". Quant trading is about "going fast" or "being super right", so either you'd need to be sitting on some huge llama.cpp/transformer improvement (possible but unlikely) or its more likely just some boring math applied faster than others. Even if they are using a "LLM", they wont tell you or even hint at it - "eff…

The math might not be complicated for a lot of market making stuff but the technical aspects are still very complicated.

Re: Financial Statement Analysis with Large Language Models

#105

Post by posting_mess »

flourpower471 wrote: post #103
posting_mess wrote: post #60

Earlier quoted context omitted.

No hedge fund registered before the last 2 weeks will use Llama3 for their "prod work" beyond "experiments". Quant trading is about "going fast" or "being super right", so either you'd need to be sitting on some huge llama.cpp/transformer improvement (possible but unlikely) or its more likely just some boring math applied faster than others. Even if they are using a "LLM", they wont tell you or even hint at it - "eff…

Well I work in prop trading and have only ever worked for prop firms- our firm trades it's own capital and distributes it to the owners and us under profit share agreements - so we have no incentive to sell ourselves as any smarter than the reality. Saying it's all high school math is a bit of a loaded phrase. "High school math" incorporates basically all practical computer science and machine learning and statistics…

>Saying it's all high school math is a bit of a loaded phrase. "High school math" incorporates basically all practical computer science and machine learning and statistics.

Im responding to the comment "do use llama3" not "breakdown your start"

> Very few people I've worked with have ever said they are doing cutting edge math - it's more like scientific research . The space of ideas is huge, and the ways to ruin yourself innumerable. It's more about people who have a scientific mindset who can make progress in a very high noise and adaptive environment.

This statement is largely true of any "edge research", as I watch the loss totals flow by on my 3rd monitor I can think of 30 different avenues of exploration (of which none are related to finance).

Trading is largely high school Math, on top of very complex code, infrastructure, and optimizations.

Re: Financial Statement Analysis with Large Language Models

#106

Post by [deleted] »

surfingdino wrote: post #28
nicce wrote: post #22

What will happen if everyone starts using heavy statistical methods or LLMs to predict stocks prices? And buys stock based on them? Will it absolutely make everything unpredictable? Edit: assuming that they initially provide good predictions

HFT guys won't touch GPT. The stakes are too high. If LLMs could give those guys an edge they'd be all over this tech.

[deleted]

Re: Financial Statement Analysis with Large Language Models

#107

Post by flourpower471 »

posting_mess wrote: post #94
Izkata wrote: post #89

Earlier quoted context omitted.

> but most "trading" isn't as complex as they'd like you/us to believe I know nothing about this world, but with things like "doctor rediscovers integration" I can't help but wonder if it's not deception but ignorance - that they think it really is where math complexity tops out at.

They hire people who know that maths doesn't "top out here", so they can point to them and say "look at that mathematicians/physicists/engineers/PHD's we employ - your $20Bn is safe here". Hedge funds aren't run by idiots, just a different kind of "smart" to an engineer. The engineers are are incredibly smart people, and so the bots are "incredibly smart" but "finance" is criticised by "true academics" because financ…

It is just a different (applied) discipline.

It's like math v engineering - you can come up with some beautiful pde theory to describe this column in a building will bend under dynamic load and use it to figure out exactly the proportions.

But engineering is about figuring out "just make its ratio of width to height greater than x"

Because the goal is different - it's not about coming up with the most pleasing description or finding the most accurate model of something. It's about making stuff in the real world in a practical, reliable way.

The three body problem is also harder than running experiments in the LHC or analysing Hubble data or treating sick kids or building roads or running a business.

Anybody who says that finance is where brains go to die might do well to look in the mirror at their own brain. There are difficult challenges for smart people in basically every industry - anybody suggesting that people not working in academia are in some way stupider should probably reconsider the quality of their own brain.

There are many many reasons to dislike finance. That it is somehow pedestrian or for the less clever people is not true. Nobody who espouses the points you've made has ever put their money where there mouth is. Why not start a firm, making a billion dollars a year because you're so smart and fund fusion research with it? Because it's obviously way more difficult than they make out.

Re: Financial Statement Analysis with Large Language Models

#108

Post by Scubabear68 »

hnthrowaway6543 wrote: post #34
primitivesuave wrote: post #13

The area where I see this making the most transformational change is by enabling average citizens to ask meaningful questions about the finances of their local government. In Cook County, Illinois, there are hundreds of local municipalities and elected authorities, all of which are producing monthly financial statements. There is not enough citizen oversight and rarely any media attention except in the most egregious…

Let's say LLMs work exactly as advertised in this case: you go into the LLM, say "find corruption in these financial reports", and it comes back with some info about the mayor spending millions on overpriced contracts with a company run by his brother. What then? You can post on Twitter, but unless you already have a following it's shouting into the void. You can go to your local newspapers, they'll probably ignore y…

Oh yeah. This. I live in a tiny community it our district school board has a $54 million budget right now, and all the audits are rubber stamps and wink and nudge from the State. When residents try to dig in and complain about waste and fraud we are shrugged off.

Re: Financial Statement Analysis with Large Language Models

#110

Post by madmask »

SavageBeast wrote: post #56
BobaFloutist wrote: post #50

Earlier quoted context omitted.

I think I could probably make more money selling a tool or strategy that consistently, reliably makes ~2% more than government bonds than I could make off it myself, with my current capital.

Seems like the money here would be building a shiny, public facing version of the tool behind a robust paywall and build a relationship with a few Broker Dealer firms who can make this product available to the Financial Advisors in their network. If you were running this yourself with $1M input capital, that'd be $20k/year per 1M of input - so $20K is a nice number to try and beat selling a product that promulgates a…

As fas as I know the more people use the strategy the worse it performs, the market is not static, it adapts. Other people react to the buy/sell of your strategy and try to exploit the new pattern.
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