The Impact of Artificial Intelligence on Financial Forecasting

Abstract

This paper explores the revolutionary role of artificial intelligence in financial prediction in Pakistani financial sector that is in the development stage. The study used a mixed-methods research design to collect data on 150 participants who are financial professionals in major Pakistani cities through the administration of structured questionnaires, which received a 82 percent response rate, as well as semi-structured interviews of 20 executives at the management level. The secondary data was used in the works of State Bank of Pakistan as well as Pakistan Stock Exchange and institutional annual reports in the past 2020-2024 years. Quantitative research with SPSS confirmed that there is indeed a link to AI implementation and improvement of forecasting accuracy, with measured improvement of forecasting accuracy ranging between 23-35 percent. Key implementation problems as indicated through qualitative findings were skill gaps, inadequate infrastructure and uncertainties over regulations. Through this research, it is proved that AI-based forecasting is much more effective than the conventional approaches to volatility-related predictions, risk assessment, and market trends analysis. Effective implementation, however, can only be achieved through heavy expenditure in developing human capital and infrastructural technological enhancement. This study can be used to understand how AI operates in its application within emerging financial markets and offer meaningful suggestions to financial banks in Pakistan that are interested in gaining a competitive edge by innovating in terms of capability forecasting.

Keywords: Role, artificial intelligence, financial prediction, Pakistani financial sector, development stage, State Bank of Pakistan, Pakistan Stock Exchange.