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Behavioural finance in an era of artificial intelligence: Longitudinal case study of robo-advisors in investment decisions

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  • Shanmuganathan, Manchuna

Abstract

This study focuses on the actual and potential implications of artificial intelligence (AI) based applications and technical issues that are related to behavioural finance. However, there have being an enormous growth in the field of AI-based application within the financial services industry, especially in behavioural finance. This paper addresses the recent developments in AI applications related to algorithms in financial advisory services. Its performance through a theoretical framework based learning model in the financial context, which are effective in producing reliable portfolios based on investors’ behaviour and known as robo-advising. In recent years, the traditional financial services have been replaced by robo-advisors in wealth management industry due to new generation of clients who have the technical know-how of the digital technologies, prefer to have active and ongoing control over their investments while relying on the information from multiple (mainly on-line) sources. Currently, robo-advisors are recognized as most disruptive trend in asset and wealth management. Thus, a robo-advisor can be defined in an automated investment platform which utilizes​ quantitative algorithms to manage investors’ portfolios along with easily accessible to customers through on-line. This paper provides a longitudinal case study based on robo-advisors and behavioural financial decision-making process by investors, because the notion that those behavioural financial decisions are important for successful execution of a customer’s financial portfolios.

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  • Shanmuganathan, Manchuna, 2020. "Behavioural finance in an era of artificial intelligence: Longitudinal case study of robo-advisors in investment decisions," Journal of Behavioral and Experimental Finance, Elsevier, vol. 27(C).
    • Handle: RePEc:eee:beexfi:v:27:y:2020:i:c:s221463501930214x
    DOI: 10.1016/j.jbef.2020.100297
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    4. Back, Camila & Morana, Stefan & Spann, Martin, 2023. "When do robo-advisors make us better investors? The impact of social design elements on investor behavior," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 103(C).
    5. Chen Chen & M. Mahdi Moeini Gharagozloo & Layla Darougar & Lei Shi, 2022. "The way digitalization is impacting international financial markets: Stock price synchronicity," International Finance, Wiley Blackwell, vol. 25(3), pages 396-415, December.
    6. Ullah, Rafid & Ismail, Hishamuddin Bin & Islam Khan, Mohammad Tariqul & Zeb, Ali, 2024. "Nexus between Chat GPT usage dimensions and investment decisions making in Pakistan: Moderating role of financial literacy," Technology in Society, Elsevier, vol. 76(C).
    7. Kumar, Satish & Rao, Sandeep & Goyal, Kirti & Goyal, Nisha, 2022. "Journal of Behavioral and Experimental Finance: A bibliometric overview," Journal of Behavioral and Experimental Finance, Elsevier, vol. 34(C).
    8. Ida Ayu Agung Faradynawati & Inga-Lill Söderberg, 2022. "Sustainable Investment Preferences among Robo-Advisor Clients," Sustainability, MDPI, vol. 14(19), pages 1-16, October.
    9. Sharbek Nermin, 2022. "How Traditional Financial Institutions have adapted to Artificial Intelligence, Machine Learning and FinTech?," Proceedings of the International Conference on Business Excellence, Sciendo, vol. 16(1), pages 837-848, August.
    10. Seiler, Volker & Fanenbruck, Katharina Maria, 2021. "Acceptance of digital investment solutions: The case of robo advisory in Germany," Research in International Business and Finance, Elsevier, vol. 58(C).
    11. Bastani, Spencer & Waldenström, Daniel, 2024. "AI, Automation and Taxation," IZA Policy Papers 212, Institute of Labor Economics (IZA).
    12. Zeeshan Ahmed & Shahid Rasool & Qasim Saleem & Mubashir Ali Khan & Shamsa Kanwal, 2022. "Mediating Role of Risk Perception Between Behavioral Biases and Investor’s Investment Decisions," SAGE Open, , vol. 12(2), pages 21582440221, May.
    13. Cardillo, Giovanni & Chiappini, Helen, 2024. "Robo-advisors: A systematic literature review," Finance Research Letters, Elsevier, vol. 62(PA).
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