Gen Al in Asset Management: Is AI making markets more or less efficient?

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Gen Al in Asset Management: Is AI making markets more or less efficient?

10 July 2026

Asia Quantitative Strategy

Gen AI in Asset Management: Is AI making markets more or less

efficient?

“Is AI going to make markets more efficient or less efficient?” This is often a question, Rupal Agarwal

+65 6326 7641 we get from investors. In this note, we show evidence to present both sides of the argument

rupal.agarwal@bernsteinsg.com and find that overall AI is likely to improve micro-efficiency — faster information processing,

better execution, broader data coverage; but can worsen macro/market-structure

Cheng Zhang, CFA, CQF inefficiency through crowding, concentration, and sharper narrative-driven reversals. We

+852 2123 2636

cheng.zhang@bernsteinsg.com believe AI would create lower average inefficiency but higher tail inefficiency.

Evidence for AI improving efficiency: The case for AI making markets more efficient

rests on its ability to process vast amounts of information faster, more consistently, and

at lower cost than humans. Early evidence is broadly supportive: Italy's 2023 temporary

ChatGPT ban reduced information production and widened bid-ask spreads, while since

GenAI's launch, EPS forecast dispersion among many large-cap/well-covered stocks has

fallen, suggesting lower information asymmetry. AI is also accelerating price discovery:

IMF shows post-LLM equity price reactions to Fed minutes aligning more quickly with

longer-term price moves, while S&P 500 earnings surprises have steadily declined as

analyst forecasts converge faster toward actual outcomes. AI driven productivity gain

(c.40% time save) is allowing broader coverage which is likely to compress the traditional

‘neglect premium’. In the last 1yr there has been 28%/23% jump in coverage of EM small-