The Value of AI Investments : An Event Study on Abnormalities in Risk and Return following AI Investment Announcements

Sammanfattning: Artificial intelligence (AI) is becoming smarter and faster and firms all over the world have entered a race to reap the benefits, investing in AI projects at an increasing rate. The benefits of AI are seemingly plenty and the value of AI in various business processes is often emphasized. However, seldom is the actual value of AI discussed in quantitative terms. Among the first to do so, this study finds a positive value of AI investments. Based on 76 announcements from 43 sample firms in the Nordic markets, findings show a significant positive impact of AI announcements on abnormal returns, with a mean of 0.91% for the event day and 1.62% for the event window of +/- one day. Further, this is to the best of our knowledge the first study ever to investigate abnormalities in stock price volatility after the announcements of AI investments. The study shows a cumulative abnormal volatility of 6.47 for the event window +/- ten days. The findings in this study indicate that AI holds significant value and that AI investments cause increased stock market risk as measured by abnormal volatility for the announcing firms.