Can LLM-based Financial Investing Strategies Outperform the Market in Long Run?
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Abstract (arXiv)
Large Language Models (LLMs) have recently been leveraged for asset pricing tasks and stock trading applications, enabling AI agents to generate investment decisions from unstructured financial data. However, most evaluations of LLM timing-based investing strategies are conducted on narrow timeframes and limited stock universes, overstating effectiveness due to survivorship and data-snooping biases. We critically assess their generalizability and robustness by proposing FINSABER, a backtesting framework evaluating timing-based strategies across longer periods and a larger universe of symbols. Systematic backtests over two decades and 100+ symbols reveal that previously reported LLM advantages deteriorate significantly under broader cross-section and over a longer-term evaluation. Our market regime analysis further demonstrates that LLM strategies are overly conservative in bull markets, underperforming passive benchmarks, and overly aggressive in bear markets, incurring heavy losses. These findings highlight the need to develop LLM strategies that are able to prioritise trend detection and regime-aware risk controls over mere scaling of framework complexity.
Key facts. Cited by 19 papers in the map (data through 7 Oct 2026). Builds on 19 of its 76 references that are in the map. First posted on arXiv 11 May 2025.
Builds on
19 of 76 references.
References · 19
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- 2020Scaling Laws for Neural Language Modelscited by 6,411
- 2016XGBoost: A Scalable Tree Boosting Systemcited by 5,120
- 2024TradingAgents: Multi-Agents LLM Financial Trading Frameworkcited by 182
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- 2024A Multimodal Foundation Agent for Financial Trading: Tool-Augmented, Diversified, and Generalistcited by 137
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7 more
- 2025FinTSB: A Comprehensive and Practical Benchmark for Financial Time Series Forecastingcited by 23
- 2023Integrating Stock Features and Global Information via Large Language Models for Enhanced Stock Return Predictioncited by 16
- 2025MarketSenseAI 2.0: Enhancing Stock Analysis through LLM Agentscited by 16
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Citing papers per year: 2025: 7; 2026: 12.
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- 2025UltraHorizon: Benchmarking Agent Capabilities in Ultra Long-Horizon Scenarioscited by 22
- 2025LiveTradeBench: Seeking Real-World Alpha with Large Language Modelscited by 13
- 2026Evaluating LLMs in Finance Requires Explicit Bias Considerationcited by 11
- 2025TradingGroup: A Multi-Agent Trading System with Self-Reflection and Data-Synthesiscited by 8
- 2026SoK: Security of Autonomous LLM Agents in Agentic Commercecited by 8
- 2025Alpha-R1: Alpha Screening with LLM Reasoning via Reinforcement Learningcited by 5
- 2026Toward Reliable Evaluation of LLM-Based Financial Multi-Agent Systems: Taxonomy, Coordination Primacy, and Cost Awarenesscited by 5
- 2026Time is Not a Label: Continuous Phase Rotation for Temporal Knowledge Graphs and Agentic Memorycited by 3
- 2025Empowering Real-World: A Survey on the Technology, Practice, and Evaluation of LLM-driven Industry Agentscited by 2
- 2026Summoning the Oracle to Slay It: Mitigating Look-Ahead Bias in Financial Backtesting with Large Language Modelscited by 2
- 2025MASFIN: A Multi-Agent System for Decomposed Financial Reasoning and Forecastingcited by 1
- 2025Market-Dependent Communication in Multi-Agent Alpha Generationcited by 0
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- 2026Fund2Persona: A Framework for Building and Refining Financial Advisor Personas from Fund Disclosure Datacited by 0
- 2026Fin-Analyst at FinMMEval 2026 Task 3: A Live Hybrid Trading Agent with LLM Specialists and Rule-Based Signalscited by 0
- 2026Hybrid Analysis for Secure MCP Tool Use in LLM Agentscited by 0
- 2026SoK: Trading Agents or Market Crashers? Dissecting Robustness and Security Failures in Academic Financial LLM Trading Schemescited by 0
- 2026Contagion on the Trading Floor: How Adversarial Signals Spread in Multi-Agent Trading Systemscited by 0
- 2026Contagion on the Trading Floor: How Adversarial Signals Spread in Multi-Agent Trading Systems17 Sep 2026
- 2026SoK: Trading Agents or Market Crashers? Dissecting Robustness and Security Failures in Academic Financial LLM Trading Schemes17 Sep 2026
- 2026Hybrid Analysis for Secure MCP Tool Use in LLM Agents28 Jul 2026
- 2026Fin-Analyst at FinMMEval 2026 Task 3: A Live Hybrid Trading Agent with LLM Specialists and Rule-Based Signals14 Jul 2026
- 2026Fund2Persona: A Framework for Building and Refining Financial Advisor Personas from Fund Disclosure Data29 Jun 2026
- 2026FundaPod: A Multi-Persona Agent Pod Architecture with Knowledge Graph Memory for AI-Assisted Fundamental Investment Research27 May 2026
- 2026Summoning the Oracle to Slay It: Mitigating Look-Ahead Bias in Financial Backtesting with Large Language Models23 May 2026
- 2026SoK: Security of Autonomous LLM Agents in Agentic Commerce15 Apr 2026
- 2026Time is Not a Label: Continuous Phase Rotation for Temporal Knowledge Graphs and Agentic Memory13 Apr 2026
- 2026Toward Reliable Evaluation of LLM-Based Financial Multi-Agent Systems: Taxonomy, Coordination Primacy, and Cost Awareness29 Mar 2026
- 2026MemGuard-Alpha: Limits of Membership Inference for Detecting and Filtering Memorization-Contaminated Signals in LLM-Based Financial Forecasting26 Mar 2026
- 2026Evaluating LLMs in Finance Requires Explicit Bias Consideration15 Feb 2026
7 more
- 2025Alpha-R1: Alpha Screening with LLM Reasoning via Reinforcement Learning29 Dec 2025
- 2025MASFIN: A Multi-Agent System for Decomposed Financial Reasoning and Forecasting26 Dec 2025
- 2025Market-Dependent Communication in Multi-Agent Alpha Generation17 Nov 2025
- 2025LiveTradeBench: Seeking Real-World Alpha with Large Language Models5 Nov 2025
- 2025Empowering Real-World: A Survey on the Technology, Practice, and Evaluation of LLM-driven Industry Agents20 Oct 2025
- 2025UltraHorizon: Benchmarking Agent Capabilities in Ultra Long-Horizon Scenarios26 Sep 2025
- 2025TradingGroup: A Multi-Agent Trading System with Self-Reflection and Data-Synthesis25 Aug 2025
- 2025UltraHorizon: Benchmarking Agent Capabilities in Ultra Long-Horizon Scenarioscited by 22
- 2025TradingGroup: A Multi-Agent Trading System with Self-Reflection and Data-Synthesiscited by 8
- 2026SoK: Security of Autonomous LLM Agents in Agentic Commercecited by 8
- 2026Toward Reliable Evaluation of LLM-Based Financial Multi-Agent Systems: Taxonomy, Coordination Primacy, and Cost Awarenesscited by 5
- 2026Time is Not a Label: Continuous Phase Rotation for Temporal Knowledge Graphs and Agentic Memorycited by 3
- 2025Market-Dependent Communication in Multi-Agent Alpha Generationcited by 0
- 2026FundaPod: A Multi-Persona Agent Pod Architecture with Knowledge Graph Memory for AI-Assisted Fundamental Investment Researchcited by 0
- 2026Hybrid Analysis for Secure MCP Tool Use in LLM Agentscited by 0
- 2026SoK: Trading Agents or Market Crashers? Dissecting Robustness and Security Failures in Academic Financial LLM Trading Schemescited by 0
- 2026Contagion on the Trading Floor: How Adversarial Signals Spread in Multi-Agent Trading Systemscited by 0
- 2026Contagion on the Trading Floor: How Adversarial Signals Spread in Multi-Agent Trading Systems17 Sep 2026
- 2026SoK: Trading Agents or Market Crashers? Dissecting Robustness and Security Failures in Academic Financial LLM Trading Schemes17 Sep 2026
- 2026Hybrid Analysis for Secure MCP Tool Use in LLM Agents28 Jul 2026
- 2026FundaPod: A Multi-Persona Agent Pod Architecture with Knowledge Graph Memory for AI-Assisted Fundamental Investment Research27 May 2026
- 2026SoK: Security of Autonomous LLM Agents in Agentic Commerce15 Apr 2026
- 2026Time is Not a Label: Continuous Phase Rotation for Temporal Knowledge Graphs and Agentic Memory13 Apr 2026
- 2026Toward Reliable Evaluation of LLM-Based Financial Multi-Agent Systems: Taxonomy, Coordination Primacy, and Cost Awareness29 Mar 2026
- 2025Market-Dependent Communication in Multi-Agent Alpha Generation17 Nov 2025
- 2025UltraHorizon: Benchmarking Agent Capabilities in Ultra Long-Horizon Scenarios26 Sep 2025
- 2025TradingGroup: A Multi-Agent Trading System with Self-Reflection and Data-Synthesis25 Aug 2025
- 2025LiveTradeBench: Seeking Real-World Alpha with Large Language Modelscited by 13
- 2025Alpha-R1: Alpha Screening with LLM Reasoning via Reinforcement Learningcited by 5
- 2025Empowering Real-World: A Survey on the Technology, Practice, and Evaluation of LLM-driven Industry Agentscited by 2
- 2025MASFIN: A Multi-Agent System for Decomposed Financial Reasoning and Forecastingcited by 1
- 2025Alpha-R1: Alpha Screening with LLM Reasoning via Reinforcement Learning29 Dec 2025
- 2025MASFIN: A Multi-Agent System for Decomposed Financial Reasoning and Forecasting26 Dec 2025
- 2025LiveTradeBench: Seeking Real-World Alpha with Large Language Models5 Nov 2025
- 2025Empowering Real-World: A Survey on the Technology, Practice, and Evaluation of LLM-driven Industry Agents20 Oct 2025
- 2026Evaluating LLMs in Finance Requires Explicit Bias Considerationcited by 11
- 2026Summoning the Oracle to Slay It: Mitigating Look-Ahead Bias in Financial Backtesting with Large Language Modelscited by 2
- 2026Fund2Persona: A Framework for Building and Refining Financial Advisor Personas from Fund Disclosure Datacited by 0
- 2026Fin-Analyst at FinMMEval 2026 Task 3: A Live Hybrid Trading Agent with LLM Specialists and Rule-Based Signalscited by 0
- 2026Fin-Analyst at FinMMEval 2026 Task 3: A Live Hybrid Trading Agent with LLM Specialists and Rule-Based Signals14 Jul 2026
- 2026Fund2Persona: A Framework for Building and Refining Financial Advisor Personas from Fund Disclosure Data29 Jun 2026
- 2026Summoning the Oracle to Slay It: Mitigating Look-Ahead Bias in Financial Backtesting with Large Language Models23 May 2026
- 2026Evaluating LLMs in Finance Requires Explicit Bias Consideration15 Feb 2026