Impact of AI on market efficiency and stability

Al-Harbi, Ahmad T. (2025) Impact of AI on market efficiency and stability. International Journal of Science and Research Archive, 14 (1). pp. 552-560. ISSN 2582-8185

In my paper, I explore the impact of artificial intelligence (AI) on market efficiency and stability, emphasizing both theoretical frameworks and empirical studies. I argue that the widespread adoption of AI enhances market efficiency by improving data processing and decision-making capabilities. However, this advancement also introduces significant challenges to market stability due to potential systemic risks and increased volatility. The findings are organized into three key sections: first, I provide a historical context and definition of AI in financial markets; second, I analyze the dual effects of AI on efficiency and stability; and third, I present empirical studies from various markets to illustrate the theoretical claims. Ultimately, my research underscores the nuanced influence of AI on market behavior and highlights the necessity for regulatory frameworks to mitigate AI-related risks while fostering innovation.