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AQR’s Problem With Machine Learning: Cats Morph Into Dogs

FYI: Machine learning has done magic, such as beating human chess champions. But in finance, expectations for the technology may need to come down a notch or two, according to quantitative firm AQR.

In a report published Monday, AQR argues that the benefits of machine learning will likely apply to problems involving optimizing portfolio construction, such as risk management, transaction cost analysis, and factor construction — at least at first. That’s because markets are different from other areas where machine learning has come to offer up breakthrough research, according to “Can Machines Learn Finance?”
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