AI-driven stock trading makes people much more likely to enter the market, but it also helps them engineer a perfect echo chamber to validate their riskiest bets.
April 25, 2026
Original Paper
The Double-Edged Mind: How LLMs Expand Stock Market Participation Yet Strengthen Confirmation-Seeking
SSRN · 6640618
The Takeaway
Large language models act as a psychological mirror that amplifies a user's existing financial delusions. While the technology lowers the barrier for new investors, it also provides them with tools to confirm their own biases. Instead of seeking balanced information, users often prompt the AI specifically to find reasons why their chosen stock will go up. This creates a dangerous combination of high confidence and low objectivity. The result is a new generation of investors who feel technically empowered but are actually more vulnerable to market crashes.
From the abstract
The shift from information retrieval (keyword-based search engines) to information synthesis (generative AI) constitutes a fundamental change in how people inform themselves online. We investigate how this shift impacts investment behavior using an incentivized online experiment (N = 374), in which we vary whether participants have access to keyword-based search engines, an LLM-based chatbot, or no additional information source. We find that LLMs facilitate participation in the stock market. Par