Traditional Methods Outperform Generative LLMs at Forecasting Credit Ratings

Large Language Models (LLMs) have been shown to perform well for many downstream tasks. Transfer learning can enable LLMs to acquire skills that were not targeted during pre-training. In financial contexts, LLMs can sometimes beat well-established benchmarks. This paper investigates how well LLMs perform in the task of forecasting corporate credit ratings. We show that while LLMs are very good at encoding textual information, traditional methods are still very competitive when it comes to encoding numeric and multimodal data. For our task, current LLMs perform worse than a more traditional XGBoost architecture that combines fundamental and macroeconomic data with high-density text-based embedding features.

Time Machine GPT

Large language models (LLMs) are often trained on extensive, temporally indiscriminate text corpora, reflecting the lack of datasets with temporal metadata. This approach is not aligned with the evolving nature of language. Conventional methods for creating temporally adapted language models often depend on further pre-training static models on time-specific data. This paper presents a new approach: a series of point-in-time LLMs called Time Machine GPT (TiMaGPT), specifically designed to be nonprognosticative. This ensures they remain uninformed about future factual information and linguistic changes. This strategy is beneficial for understanding language evolution and is of critical importance when applying models in dynamic contexts, such as time-series forecasting, where foresight of future information can prove problematic. We provide access to both the models and training datasets.

Forecasting COVID-19 Caseloads Using Unsupervised Embedding Clusters of Social Media Posts

We present a novel approach incorporating transformer-based language models into infectious disease modelling. Text-derived features are quantified by tracking high-density clusters of sentence-level representations of Reddit posts within specific US states' COVID-19 subreddits. We benchmark these clustered embedding features against features extracted from other high-quality datasets. In a threshold-classification task, we show that they outperform all other feature types at predicting upward trend signals, a significant result for infectious disease modelling in areas where epidemiological data is unreliable. Subsequently, in a time-series forecasting task we fully utilise the predictive power of the caseload and compare the relative strengths of using different supplementary datasets as covariate feature sets in a transformer-based time-series model.