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Human-Robot Interactions in Investment Decisions

Author

Listed:
  • Bianchi, Milo
  • Brière, Marie

Abstract

We study the introduction of robo-advising on a large set of Employee Saving Plans. Differently from many services that fully automate portfolio decisions, our robo-advisor proposes investment and rebalancing strategies, leaving investors free to follow or ignore them. The resulting human-robot interactions occur both at the time of the subscription and over time, as the robot sends alerts when the investor’s portfolio gets too far from the target allocation. We show that the robo-service is associated with an increase in investors’ attention and trading activities. Following the robot’s alerts, investors change their rebalancing behaviors so as to stay closer to their target allocation, which results in larger portfolio returns. Counterfactual returns induced by automatic rebalancing by the robot would be only slightly higher, suggesting that on average the financial cost of letting investors retain control is not large.

Suggested Citation

  • Bianchi, Milo & Brière, Marie, 2021. "Human-Robot Interactions in Investment Decisions," TSE Working Papers 21-1251, Toulouse School of Economics (TSE), revised Mar 2024.
    • Handle: RePEc:tse:wpaper:125979
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    File URL: https://www.tse-fr.eu/sites/default/files/TSE/documents/doc/wp/2021/wp_tse_1251.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Marie Briere & James Poterba & Ariane Szafarz, 2024. "Does Tax Deductibility Increase Retirement Saving? Lessons from a French Natural Experiment," Working Papers CEB 24-014, ULB -- Universite Libre de Bruxelles.

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    More about this item

    Keywords

    Robo-Advising; Human-robot Interaction; Financial; Inclusion; Portfolio Dynamics; Long-Term Investment.;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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