Can Artificial Intelligence Outperform Humans in ETF Management?

Abstract

‘Exchange Traded Funds’ (ETFs) are basket/bundle funds consisting of a portfolio of stock assets from multiple companies and organizations, traded similar to normal stocks. ETFs help with diversification of the investment, risk management and potentially gaining higher returns. Typically, ETFs are either passively managed with little human intervention and yielding performance that track market indices or actively managed by fund managers targeting to outperform market indices. With the recent Artificial Intelligence (AI) boom, there’s been an increased interest in leveraging AI to manage ETFs, with the goal of maximizing returns and cost efficiency. The application of AI in managing ETFs represents a nascent yet promising area in the financial sector. This research paper endeavors to study the potential of AI in ETF management through a comparative analysis of data from analogous ETFs.