Robo Economicus? The Impact of Behavioral Biases on Robo-Advisory

Peter Scholz (), David Grossmann () and Joachim Goldberg ()
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Peter Scholz: Hamburg School of Business Administration
David Grossmann: Otto M. Schroeder Bank AG
Joachim Goldberg: Goldberg & Goldberg

Chapter Chapter 4 in Robo-Advisory, 2021, pp 53-69 from Palgrave Macmillan

Abstract: Abstract Human investors are supposed to be rather emotional and prone to biases in their financial decision-making. By contrast, robots and algorithms have the reputation to be fully rational and therefore are very often considered as ideal investors. But since they are programmed by humans, the question arises how unbiased algorithms and robots really are. We analyze robo-advisors with respect to home bias, mental accounting, and overconfidence and find that the recommendation from robo-advice is not free from behavioral biases. After all, it seems that robo economicus is not as close to the model of Homo economicus as supposed.

Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:pal:psincp:978-3-030-40818-3_4

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DOI: 10.1007/978-3-030-40818-3_4

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