Ray Dalio: How to use algorithms to make best financial decisions

Credit: Finance Jane

More and more financial companies use algorithms in areas such as loan pricing, stock trading, asset-liability management, and many automated functions.

For example, algorithmic trading, known as Algo trading, is used for deciding the timing, pricing, and quantity of stock orders.

The world’s biggest hedge fund company, Bridgewater Associates, already utilizes algorithms in the workplace.

For example, the AI they use is in the form of a strategic Hedge Fund system called “Pure Alpha.”

Their existing AI system uses economic data, while the new system will use science principles relating to management which would then pick up internal data to create managerial improvements.

So how to use algorithms to make the best decisions in financial investments and business management?

In this video, Ray Dalio, the founder of Bridgewater, gives his answer.

He suggests that algorithmic decision-making has the potential to eliminate, introduce or amplify biases or discrimination.

However, this depends on how the software is deployed, and the quality and representativeness of the underlying data used by the algorithm.

Source: Finance Jane.