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Should We Invest In AI, Or Invest Using AI? .

A key concern among sophisticated investors is that trading models built using back-tests on historical data would fail to deliver good returns in real-time since previously identified trends tend to break down

Should We Invest In AI, Or Invest Using AI?

Sandeep Rao, Nasdaq Global Information Services

Systematic strategies are widely thought to have been carving up the markets in the eight-year bull run enjoyed in markets. However, a key concern among sophisticated investors is that trading models built using back-tests on historical data would fail to deliver good returns in real-time since previously identified trends tend to break down – an event that is known to happen.

The results from December 2010 through 2016 tell a familiar tale: the EurekaHedge indexes’ performance suggests that the AI/machine learning hedge funds covered therein outperformed the average global hedge fund covered therein for all years excluding 2012. Also, while returns have been more volatile compared to the hedge funds covered, the AI/machine learning funds covered have posted considerably lower annualized volatilities compared with systematic trend following strategies.

It was also reported that the EurekaHedge AI/Machine Learning Index posted better risk-adjusted returns over the last two- and three-year annualized periods compared to its peer indexes described here, with Sharpe ratios of 1.51 and 1.53 over both periods respectively.

Read the entire research essay here.

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TAGS: AI ETF Indexes
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