In the age of Transformers and neural nets that write poetry, it’s tempting to assume deep learning dominates every corner of AI. But in quantitative investing, the roots tell a different story. A recent paper—QuantBench: Benchmarking AI Methods for Quantitative Investment1—delivers a grounded reminder: tree-based models still outperform deep learning (DL) methods across key financial prediction tasks. ...
When your AI believes too much, you pay the price. AI-driven quantitative trading is supposed to be smart—smarter than the market, even. But just like scientific AI systems that hallucinate new protein structures that don’t exist, trading models can conjure signals out of thin air. These errors aren’t just false positives—they’re corrosive hallucinations: misleading outputs that look plausible, alter real decisions, and resist detection until it’s too late. The Science of Hallucination Comes to Finance In a recent philosophical exploration of AI in science, Charles Rathkopf introduced the concept of corrosive hallucinations—a specific kind of model error that is both epistemically disruptive and resistant to anticipation1. These are not benign missteps. They’re illusions that change the course of reasoning, especially dangerous when embedded in high-stakes workflows. ...