The New Market Fabric

Feb 17
1 min read

In this new report, the Bocconi Students Asset Management Club explores how artificial intelligence is fundamentally reshaping global financial markets, accelerating trading speeds, automating investment decisions, and expanding access through robo-advisors while simultaneously introducing new systemic risks.

As AI-driven models increasingly dominate trading, sentiment analysis, and portfolio construction, markets become faster and more efficient, but also more fragile, with heightened volatility, algorithmic herding, and growing concentration in U.S. large-cap technology stocks due to shared models and data sources — a phenomenon described as “model monoculture.”

The report highlights how real-time sentiment trading and automated decision-making can amplify misinformation and trigger feedback loops, compressing crisis timelines from minutes to microseconds. While AI lowers costs, democratizes investing, and helps reduce behavioral biases like panic selling, its widespread adoption may reduce market diversity and increase systemic vulnerability. Ultimately, the authors argue that proactive regulation — including model diversity requirements, updated circuit breakers, and safeguards against misinformation — is essential to ensure that AI enhances market resilience rather than undermines it.

See the full report in the link below!