3. Natural Language Processing (NLP) for Sentiment Analysis
– Natural language processing (NLP) is another AI technique that is rapidly gaining popularity in hedge funds. NLP allows algorithms to analyze textual data from various sources, such as news articles, social media posts, and financial reports, to gauge market sentiment.
– Hedge funds use sentiment analysis to gain insights into market trends, corporate news, and geopolitical events. By understanding how market participants feel about a particular asset or company, AI-driven models can help hedge funds make more informed decisions, especially in volatile markets.