Artificial Intelligence and Systemic Risk: A Unified Model of Performative Prediction, Algorithmic Herding, and Cognitive Dependency in Financial Markets

A new unified model demonstrates that AI adoption in financial markets creates systemic risk through three channels: performative prediction, algorithmic herding, and cognitive dependency. Using SEC Form 13F data from 2013-2024, researchers found AI adoption generates superlinear growth in systemic risk and tail-loss amplification of 18-54%.