Since we are in the era of ‘big data’ and fast computers, you may wonder whether machine learning has conquered finance, more specifically whether the computer can now replace humans in making accurate predictions of asset prices. If so, more power to robo-advisers!  If not, we’ve got to downplay the hype.

There has indeed been big leaps in in machine learning in specific domains (by the way, I will use machine learning interchangeably with artificial intelligence or AI). In 2017, the world recently witnessed one particularly impressive feat when Deepmind’s AlphaGo program beat the world’s champion Lee Se-Dol in the complex game, Go. Deepmind went on to develop an even smarter version of the program called Zero that can learn on its own, given the basic rules. After three days of self-play, Zero was smart enough to defeat the version of itself that beat Lee Se-dol, winning handily 100 games to nil.