Artificial Intelligence in investing: Adoption, systemic risk, and the question of who sets the price
5 August 2026
Abstract
This white paper examines the growing role of artificial intelligence in investment management and its implications for market stability, financial regulation, and price discovery. It reviews the deployment of AI across the investment value chain, from research and portfolio construction to trading and risk management, while analysing documented failures, hidden vulnerabilities, and finance-specific systemic risks associated with increasingly automated markets. The paper evaluates India’s emerging AI governance architecture, including the IndiaAI Mission, SEBI’s framework for retail algorithmic trading, the RBI’s FREE-AI framework, and national AI governance guidelines. It argues that while AI offers substantial gains in analytical capability and operational efficiency, increasing reliance on common models, datasets, vendors, and algorithmic strategies may alter the incentives underpinning price discovery and market efficiency. The paper concludes by identifying key policy, regulatory, and governance questions arising from AI’s expanding role in financial markets and highlights areas requiring further research and institutional preparedness.
Keywords: Artificial intelligence, investing, financial markets, price discovery, market efficiency, algorithmic trading, systemic risk, financial stability, asset management, AI governance, SEBI, IndiaAI mission
Suggested Citation
Talwar, S., Shekhar, V., and Roy, A. (2026). Artificial Intelligence in Investing: Adoption, Systemic Risk, and the Question of Who Sets the Price. White Paper, SPJIMR Paper Series, WPR-2026-11. S.P. Jain Institute of Management & Research (SPJIMR). https://www.spjimr.org/paperseries/wpr-2026-11/
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