{"id":"https://openalex.org/W7211897452","doi":"https://doi.org/10.48550/arxiv.2609.04373","title":"Why Better Models Can Create Riskier Systems: Evidence from LLM Agents in Financial Markets","display_name":"Why Better Models Can Create Riskier Systems: Evidence from LLM Agents in Financial Markets","publication_year":2026,"publication_date":"2026-09-03","ids":{"openalex":"https://openalex.org/W7211897452","doi":"https://doi.org/10.48550/arxiv.2609.04373"},"language":"en","primary_location":{"id":"pmh:oai:arXiv.org:2609.04373","doi":null,"is_oa":true,"landing_page_url":"https://arxiv.org/abs/2609.04373","pdf_url":"https://arxiv.org/pdf/2609.04373","source":{"id":"https://openalex.org/S4306400194","display_name":"arXiv (Cornell University)","issn_l":"2331-8422","issn":["2331-8422"],"is_oa":true,"is_in_doaj":false,"is_core":false,"listed_in":[],"host_organization":"https://openalex.org/I205783295","host_organization_name":"Cornell University","host_organization_lineage":["https://openalex.org/I205783295"],"host_organization_lineage_names":[],"type":"repository"},"license":null,"license_id":null,"version":"submittedVersion","is_accepted":false,"is_published":false,"raw_source_name":null,"raw_type":"text"},"volume":null,"type":"preprint","is_traditional":true,"indexed_in":["arxiv","datacite"],"open_access":{"is_oa":true,"oa_status":"green","oa_url":"https://arxiv.org/pdf/2609.04373","any_repository_has_fulltext":true},"authorships":[{"author_position":"first","author":{"id":"https://openalex.org/A5134804385","display_name":"Jillian Ross","orcid":null,"observed_orcids":[]},"institutions":[{"id":"https://openalex.org/I63966007","display_name":"Massachusetts Institute of Technology","ror":"https://ror.org/042nb2s44","country_code":"US","type":"education","lineage":["https://openalex.org/I63966007"]}],"countries":["US"],"is_corresponding":false,"raw_author_name":"Ross, Jillian","raw_affiliation_strings":["Department of Electrical Engineering and Computer Science Massachusetts Institute of Technology"],"raw_orcid":null,"affiliations":[{"raw_affiliation_string":"Department of Electrical Engineering and Computer Science Massachusetts Institute of Technology","institution_ids":["https://openalex.org/I63966007"]}]},{"author_position":"middle","author":{"id":"https://openalex.org/A5084226439","display_name":"Eric C. So","orcid":"https://orcid.org/0000-0002-9345-2123","observed_orcids":["https://orcid.org/0000-0002-9345-2123"]},"institutions":[{"id":"https://openalex.org/I63966007","display_name":"Massachusetts Institute of Technology","ror":"https://ror.org/042nb2s44","country_code":"US","type":"education","lineage":["https://openalex.org/I63966007"]}],"countries":["US"],"is_corresponding":false,"raw_author_name":"So, Eric","raw_affiliation_strings":["Sloan School of Management Massachusetts Institute of Technology"],"raw_orcid":null,"affiliations":[{"raw_affiliation_string":"Sloan School of Management Massachusetts Institute of Technology","institution_ids":["https://openalex.org/I63966007"]}]},{"author_position":"middle","author":{"id":"https://openalex.org/A5025602555","display_name":"Zoe De Simone","orcid":"https://orcid.org/0000-0001-9138-9362","observed_orcids":["https://orcid.org/0000-0001-9138-9362"]},"institutions":[{"id":"https://openalex.org/I63966007","display_name":"Massachusetts Institute of Technology","ror":"https://ror.org/042nb2s44","country_code":"US","type":"education","lineage":["https://openalex.org/I63966007"]}],"countries":["US"],"is_corresponding":false,"raw_author_name":"De Simone, Zoe","raw_affiliation_strings":["Department of Electrical Engineering and Computer Science Massachusetts Institute of Technology"],"raw_orcid":null,"affiliations":[{"raw_affiliation_string":"Department of Electrical Engineering and Computer Science Massachusetts Institute of Technology","institution_ids":["https://openalex.org/I63966007"]}]},{"author_position":"middle","author":{"id":"https://openalex.org/A5134076906","display_name":"Charles Pozniak","orcid":"https://orcid.org/0009-0006-8316-9515","observed_orcids":["https://orcid.org/0009-0006-8316-9515"]},"institutions":[{"id":"https://openalex.org/I136199984","display_name":"Harvard University","ror":"https://ror.org/03vek6s52","country_code":"US","type":"education","lineage":["https://openalex.org/I136199984"]}],"countries":["US"],"is_corresponding":false,"raw_author_name":"Pozniak, Charles","raw_affiliation_strings":["Belfer Center for Science and International Affairs Harvard Kennedy School"],"raw_orcid":null,"affiliations":[{"raw_affiliation_string":"Belfer Center for Science and International Affairs Harvard Kennedy School","institution_ids":["https://openalex.org/I136199984"]}]},{"author_position":"last","author":{"id":"https://openalex.org/A5109980718","display_name":"Andrew W. Lo","orcid":"https://orcid.org/0000-0003-2944-7773","observed_orcids":["https://orcid.org/0000-0003-2944-7773"]},"institutions":[{"id":"https://openalex.org/I63966007","display_name":"Massachusetts Institute of Technology","ror":"https://ror.org/042nb2s44","country_code":"US","type":"education","lineage":["https://openalex.org/I63966007"]}],"countries":["US"],"is_corresponding":false,"raw_author_name":"Lo, Andrew W.","raw_affiliation_strings":["Sloan School of Management Massachusetts Institute of Technology"],"raw_orcid":null,"affiliations":[{"raw_affiliation_string":"Sloan School of Management Massachusetts Institute of Technology","institution_ids":["https://openalex.org/I63966007"]}]}],"institutions":[],"countries_distinct_count":1,"institutions_distinct_count":2,"corresponding_author_ids":[],"corresponding_institution_ids":[],"apc_list":null,"apc_paid":null,"fwci":null,"has_fulltext":true,"cited_by_count":1,"citation_normalized_percentile":null,"cited_by_percentile_year":null,"biblio":{"volume":null,"issue":null,"first_page":null,"last_page":null},"is_retracted":false,"is_paratext":false,"is_xpac":false,"primary_topic":{"id":"https://openalex.org/T10047","display_name":"Financial Markets and Investment Strategies","score":0.5214999914169312,"subfield":{"id":"https://openalex.org/subfields/2003","display_name":"Finance"},"field":{"id":"https://openalex.org/fields/20","display_name":"Economics, Econometrics and Finance"},"domain":{"id":"https://openalex.org/domains/2","display_name":"Social Sciences"}},"topics":[{"id":"https://openalex.org/T10047","display_name":"Financial Markets and Investment Strategies","score":0.5214999914169312,"subfield":{"id":"https://openalex.org/subfields/2003","display_name":"Finance"},"field":{"id":"https://openalex.org/fields/20","display_name":"Economics, Econometrics and Finance"},"domain":{"id":"https://openalex.org/domains/2","display_name":"Social Sciences"}},{"id":"https://openalex.org/T11326","display_name":"Stock Market Forecasting Methods","score":0.18930000066757202,"subfield":{"id":"https://openalex.org/subfields/1803","display_name":"Management Science and Operations Research"},"field":{"id":"https://openalex.org/fields/18","display_name":"Decision Sciences"},"domain":{"id":"https://openalex.org/domains/2","display_name":"Social Sciences"}},{"id":"https://openalex.org/T11270","display_name":"Complex Systems and Time Series Analysis","score":0.04170000180602074,"subfield":{"id":"https://openalex.org/subfields/2002","display_name":"Economics and Econometrics"},"field":{"id":"https://openalex.org/fields/20","display_name":"Economics, Econometrics and Finance"},"domain":{"id":"https://openalex.org/domains/2","display_name":"Social Sciences"}}],"keywords":[{"id":"https://openalex.org/keywords/large-language-models","display_name":"large language models","score":0.9039999842643738},{"id":"https://openalex.org/keywords/llm-based-agents","display_name":"LLM agents","score":0.8230000138282776},{"id":"https://openalex.org/keywords/financial-markets","display_name":"financial markets","score":0.8339999914169312},{"id":"https://openalex.org/keywords/systematic-risk","display_name":"systematic risk","score":0.906000018119812},{"id":"https://openalex.org/keywords/agent-based-modeling","display_name":"agent-based modeling","score":0.6449999809265137},{"id":"https://openalex.org/keywords/misinformation","display_name":"misinformation","score":0.5879999995231628},{"id":"https://openalex.org/keywords/market-risk","display_name":"market risk","score":0.5920000076293945}],"concepts":[{"id":"https://openalex.org/C93225998","wikidata":"https://www.wikidata.org/wiki/Q1941972","display_name":"Moderation","level":2,"score":0.585099995136261},{"id":"https://openalex.org/C19244329","wikidata":"https://www.wikidata.org/wiki/Q208697","display_name":"Financial market","level":2,"score":0.5738000273704529},{"id":"https://openalex.org/C2778755073","wikidata":"https://www.wikidata.org/wiki/Q10858537","display_name":"Scale (ratio)","level":2,"score":0.4596000015735626},{"id":"https://openalex.org/C144133560","wikidata":"https://www.wikidata.org/wiki/Q4830453","display_name":"Business","level":0,"score":0.44200000166893005},{"id":"https://openalex.org/C2776990098","wikidata":"https://www.wikidata.org/wiki/Q13579947","display_name":"Misinformation","level":2,"score":0.41679999232292175},{"id":"https://openalex.org/C166052673","wikidata":"https://www.wikidata.org/wiki/Q83021","display_name":"Empirical evidence","level":2,"score":0.4140999913215637},{"id":"https://openalex.org/C2777267654","wikidata":"https://www.wikidata.org/wiki/Q3519023","display_name":"Test (biology)","level":2,"score":0.41110000014305115},{"id":"https://openalex.org/C120936955","wikidata":"https://www.wikidata.org/wiki/Q2155640","display_name":"Empirical research","level":2,"score":0.37619999051094055},{"id":"https://openalex.org/C162324750","wikidata":"https://www.wikidata.org/wiki/Q8134","display_name":"Economics","level":0,"score":0.36160001158714294},{"id":"https://openalex.org/C148609458","wikidata":"https://www.wikidata.org/wiki/Q7021281","display_name":"Nexus (standard)","level":2,"score":0.3443000018596649},{"id":"https://openalex.org/C76073288","wikidata":"https://www.wikidata.org/wiki/Q1337875","display_name":"Financial risk","level":2,"score":0.3118000030517578},{"id":"https://openalex.org/C556758197","wikidata":"https://www.wikidata.org/wiki/Q580018","display_name":"Monetary economics","level":1,"score":0.2971000075340271},{"id":"https://openalex.org/C2778571376","wikidata":"https://www.wikidata.org/wiki/Q1355821","display_name":"Frontier","level":2,"score":0.2953000068664551},{"id":"https://openalex.org/C175444787","wikidata":"https://www.wikidata.org/wiki/Q39072","display_name":"Microeconomics","level":1,"score":0.2847999930381775},{"id":"https://openalex.org/C10138342","wikidata":"https://www.wikidata.org/wiki/Q43015","display_name":"Finance","level":1,"score":0.2773999869823456},{"id":"https://openalex.org/C144587487","wikidata":"https://www.wikidata.org/wiki/Q1369234","display_name":"Systemic risk","level":3,"score":0.25589999556541443}],"mesh":[],"locations_count":2,"locations":[{"id":"pmh:oai:arXiv.org:2609.04373","doi":null,"is_oa":true,"landing_page_url":"https://arxiv.org/abs/2609.04373","pdf_url":"https://arxiv.org/pdf/2609.04373","source":{"id":"https://openalex.org/S4306400194","display_name":"arXiv (Cornell University)","issn_l":"2331-8422","issn":["2331-8422"],"is_oa":true,"is_in_doaj":false,"is_core":false,"listed_in":[],"host_organization":"https://openalex.org/I205783295","host_organization_name":"Cornell University","host_organization_lineage":["https://openalex.org/I205783295"],"host_organization_lineage_names":[],"type":"repository"},"license":null,"license_id":null,"version":"submittedVersion","is_accepted":false,"is_published":false,"raw_source_name":null,"raw_type":"text"},{"id":"doi:10.48550/arxiv.2609.04373","doi":"https://doi.org/10.48550/arxiv.2609.04373","is_oa":true,"landing_page_url":"https://doi.org/10.48550/arxiv.2609.04373","pdf_url":null,"source":{"id":"https://openalex.org/S4306400194","display_name":"arXiv (Cornell University)","issn_l":"2331-8422","issn":["2331-8422"],"is_oa":true,"is_in_doaj":false,"is_core":false,"listed_in":[],"host_organization":"https://openalex.org/I205783295","host_organization_name":"Cornell University","host_organization_lineage":["https://openalex.org/I205783295"],"host_organization_lineage_names":[],"type":"repository"},"license":null,"license_id":null,"version":null,"is_accepted":false,"is_published":false,"raw_source_name":null,"raw_type":"Preprint"}],"best_oa_location":{"id":"pmh:oai:arXiv.org:2609.04373","doi":null,"is_oa":true,"landing_page_url":"https://arxiv.org/abs/2609.04373","pdf_url":"https://arxiv.org/pdf/2609.04373","source":{"id":"https://openalex.org/S4306400194","display_name":"arXiv (Cornell University)","issn_l":"2331-8422","issn":["2331-8422"],"is_oa":true,"is_in_doaj":false,"is_core":false,"listed_in":[],"host_organization":"https://openalex.org/I205783295","host_organization_name":"Cornell University","host_organization_lineage":["https://openalex.org/I205783295"],"host_organization_lineage_names":[],"type":"repository"},"license":null,"license_id":null,"version":"submittedVersion","is_accepted":false,"is_published":false,"raw_source_name":null,"raw_type":"text"},"sustainable_development_goals":[],"study_designs":[],"awards":[],"funders":[],"has_content":{"pdf":true,"grobid_xml":true},"content_urls":{"pdf":"https://content.openalex.org/works/W7211897452.pdf","grobid_xml":"https://content.openalex.org/works/W7211897452.grobid-xml"},"referenced_works_count":0,"referenced_works":[],"related_works":["https://openalex.org/W7215857069","https://openalex.org/W7214593952","https://openalex.org/W7161686265","https://openalex.org/W6948239218","https://openalex.org/W7168176241","https://openalex.org/W7155164929","https://openalex.org/W7161710072","https://openalex.org/W7163878174","https://openalex.org/W4417009306","https://openalex.org/W7150939889"],"abstract_inverted_index":{"Large":[0],"language":[1],"models":[2,143],"(LLMs)":[3],"are":[4],"being":[5],"deployed":[6],"at":[7],"scale":[8],"in":[9,77,156],"consequential":[10],"real-world":[11],"systems,":[12],"from":[13],"financial":[14,78],"markets":[15,79],"to":[16,19,47],"content":[17],"moderation":[18],"hiring.":[20],"We":[21,35,59,91],"show":[22],"that":[23,37,54,101],"improving":[24,141],"individual":[25,142],"model":[26],"capability":[27,139],"can":[28,42],"degrade":[29],"rather":[30],"than":[31],"improve":[32],"system-level":[33,149],"outcomes.":[34,150],"hypothesize":[36],"shared":[38,108],"training":[39],"and":[40,73,118],"architectures":[41],"lead":[43],"more":[44,49],"capable":[45],"LLMs":[46,96],"behave":[48],"similarly,":[50],"creating":[51],"correlated":[52,99,129],"actions":[53],"do":[55],"not":[56,145],"diversify":[57],"away.":[58],"develop":[60],"a":[61,69,123,132,138],"general":[62],"framework":[63],"showing":[64],"how":[65],"this":[66],"correlation":[67],"creates":[68],"non-diversifiable":[70],"risk":[71],"floor":[72],"test":[74],"its":[75],"predictions":[76],"using":[80],"an":[81,160],"agent-based":[82],"simulation":[83],"with":[84,103],"LLM":[85],"traders":[86],"of":[87],"varying":[88],"general-purpose":[89],"capability.":[90],"find":[92],"that:":[93],"(1)":[94],"frontier":[95],"exhibit":[97],"significantly":[98],"behavior":[100,130],"increases":[102],"capability;":[104],"(2)":[105],"when":[106,120],"their":[107],"reasoning":[109],"is":[110,159],"accurate,":[111],"increasing":[112],"agent":[113],"participation":[114],"reduces":[115],"market-level":[116],"risk;":[117],"(3)":[119],"agents":[121],"share":[122],"common":[124],"misinformation":[125],"environment,":[126],"the":[127,152],"same":[128,153],"becomes":[131],"liability.":[133],"Together,":[134],"these":[135],"results":[136],"identify":[137],"paradox:":[140],"does":[144],"necessarily":[146],"produce":[147],"better":[148],"Whether":[151],"dynamics":[154],"arise":[155],"other":[157],"domains":[158],"open":[161],"empirical":[162],"question.":[163]},"counts_by_year":[{"year":2026,"cited_by_count":1}],"updated_date":"2026-11-06T12:05:46.655746","created_date":"2026-09-08T00:00:00"}