(Generative) AI in Financial Economics
Abstract
This review article synthesizes the burgeoning literature on the intersection of (generative) ar- tificial intelligence (AI) and financial economics. We organize our review around six key areas: (1) the emergent role of generative AI as analytic tools, external shocks to the economy, and au- tonomous economic agents; (2) corporate finance, focusing on how firms respond to and benefit from AI; (3) asset pricing, examining how AI brings novel methodologies for return predictability, stochastic discount factor estimation, and investment; (4) household finance, investigating how AI promotes financial inclusion and improves financial services; (5) labor economics, analyzing AI’s impact on labor market dynamics; and (6) the risks and challenges associated with AI in financial market. We conclude by identifying unanswered questions and discussing promising avenues for future research.