Artificial Intelligence in Portfolio Management: Transforming Financial Decision-Making and Optimizing Risk Management

This chapter aims to highlight the potential of artificial intelligence (AI) technology in transforming the AI landscape and the impact that AI will have on finance, particularly portfolio management, including financial decision-making, risk management, and portfolio optimization. The study emphasizes using AI to improve traditional financial models by incorporating specific AI techniques, such as predictive analytics, sentiment analysis, and reinforcement learning, to address the limitations of traditional approaches. This highlights key AI trends, such as deep learning and machine learning models. It highlights the need for interdisciplinary approaches to integrate behavioral finance, data science, and traditional financial theories. While progress is evident, the report addresses integration challenges of poor data quality, algorithmic bias, and regulatory compliance hurdles. By systematically examining AI’s practical uses and advantages, these findings represent a significant contribution to this field, which also sheds light on the limitations of actual application results and can be incorporated into practice and academic research. The chapter ends with a discussion of directions for future research and practice. It highlights the importance of continuous innovation, ethics, and regulation to enable appropriate and sustainable use of AI in portfolio management.