 What drives robo-advice?Bernd Scherer and Sebastian Lehner Journal of Empirical Finance, 2025, vol. 80, issue C Abstract: The promise of robo-advisory firms is to provide low-cost access to diversified portfolios built according to academic literature on normative portfolio choice. We investigate the extent to which robo-advice aligns with normative advice. Using web-scraped portfolio recommendations for 151,200 investor types from a major US robo-advisor, we find that investment goals and time horizons significantly influence recommended equity allocations, while Merton-type hedging demands are largely ignored. Our results suggest that commercial robo-advisors prioritize simplicity and client perceptions over complex, normative models. By integrating data from the NFCS survey, we further explore how demographic factors influence the likelihood of using robo-advisory services. This study provides empirical evidence on how closely robo-advisory services align with normative portfolio theory, highlighting the practical compromises made in the pursuit of broad market appeal and user-friendly solutions. Keywords: Robo-advice; Portfolio theory; Merton hedging demand; Behavioral finance; Demographic factors (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:80:y:2025:i:c:s0927539824001087 DOI: 10.1016/j.jempfin.2024.101574 Access Statistics for this article Journal of Empirical Finance is currently edited by R. T. Baillie, F. C. Palm, Th. J. Vermaelen and C. C. P. Wolff More articles in Journal of Empirical Finance from Elsevier |
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