The Impact of Generative AI on Information Processing: Evidence from the Ban of ChatGPT in Italy
The paper examines Italy’s unexpected ChatGPT ban’s impact on financial analysts’ AI usage, forecasts, market efficiency, and investor reactions.
What it examines
This study examines how generative AI tools such as ChatGPT influence information processing in capital markets. Using the Italian ChatGPT ban as a natural experiment, the researchers analyze analyst reports and forecasts to compare domestic and foreign analysts, assessing changes in forecast frequency, accuracy, and market efficiency.
What it concludes
The results show that restricting generative AI use reduces analysts’ information production and market efficiency. These findings imply that AI tools can enhance forecasting and liquidity. Regulators and financial firms can use these insights to shape policies and boost investor decision-making. Future research may explore AI’s broader financial impacts.
Evidence objects
Italys abrupt ChatGPT ban forced financial analysts to abandon AI-assisted report drafting, switching to human-like writing with elevated perplexity and burstiness, triggering a 21% forecast reduction and lower accuracy rates.
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Employing natural language processing metrics with a difference-in-differences approach, the study introduces innovative measures for AI-generated text quality, linking disruptions to bid--ask spreads and significantly intensified market reactions to earnings.
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The study concludes that generative AI is essential for enhancing information flow, market efficiency, and financial decision-making, despite occasional VPN circumvention, offering fresh insights into improved analysis and market performance.
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Exploiting Italys ChatGPT ban, this paper uses a natural experiment to examine generative AIs effect on financial analysts information processing and market efficiency. It innovatively applies text-based metrics to detect AI-generated content and contrasts domestic and foreign analysts, offering original and novel empirical insights that significantly advance capital market research.
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Raw abstract and provenance
- This paper explores how the emergence of generative artificial intelligence is reshaping the information environment in capital markets. Leveraging an unexpected ban on …
Source row: 1952 · abstract type: snippet