糖心原创

An experiment on robo-advising

Robo-advisors are a novel tool in financial markets that provide traders with financial advice and offer asset management based on algorithms. Such algorithms consider individual characteristics of traders when assisting in financial decision making. While there is some work examining regulation of robo-advisors, relatively little is known of the consequences they may have on the behaviour of investors. In this study, we focus on i) the characteristics of robo-advisors that lead to adaptation, ii) characteristics of participants who take up these new financial tools and iii) how robo-advisors influence behaviour of individual traders and shape financial markets in general. To this end, we elicit characteristics of subjects and invite them to join an experimental financial market running over 10 weeks. In each week, subjects choose how to invest into different assets which vary with respect to their relative risk and return. Subjects either have access to robo advice, may delegate all decision to the algorithm, or trade on their own. Decisions of the algorithm and the nature of advice depend on the characteristics we previously elicited. We find no effect on market participation. But robo advisors help investors to avoid mistakes, make rebalancing more frequent, and overall yield portfolios closer to the utility maximizing ones.