Artificial Intelligence Alter Egos:Who benefits from Robo-investing?

75 Pages Posted: 9 Jul 2019 Last revised: 12 Jul 2019

See all articles by Catherine D'Hondt

Catherine D'Hondt

UCLouvain - Louvain School of Management

Rudy De Winne

UCLouvain

Eric Ghysels

University of North Carolina Kenan-Flagler Business School; University of North Carolina (UNC) at Chapel Hill - Department of Economics

Steve Raymond

University of North Carolina (UNC) at Chapel Hill - Department of Economics

Date Written: July 6, 2019

Abstract

Artificial intelligence, or AI, enhancements are increasingly shaping our daily lives. Financial decision-making is no exception to this. We introduce the notion of AI Alter Egos, which are shadow robo-investors, and use a unique data set covering brokerage accounts for a large cross-section of investors over a sample from January 2003 to March 2012, which includes the 2008 financial crisis, to assess the benefits of robo-investing. We have detailed investor characteristics and records of all trades. Our data set consists of investors typically targeted for robo-advising. We explore robo-investing strategies commonly used in the industry, including some involving advanced machine learning methods. The man versus machine comparison allows us to shed light on potential benefits the emerging robo-advising industry may provide to certain segments of the population, such as low income and/or high risk averse investors.

Keywords: Machine Learning, Portfolio Allocation, FinTech

JEL Classification: G11, C45, C55, C58

Suggested Citation

D'Hondt, Catherine and De Winne, Rudy and Ghysels, Eric and Raymond, Steve, Artificial Intelligence Alter Egos:Who benefits from Robo-investing? (July 6, 2019). Available at SSRN: https://ssrn.com/abstract=3415981 or http://dx.doi.org/10.2139/ssrn.3415981

Catherine D'Hondt

UCLouvain - Louvain School of Management ( email )

151 Chaussée de Binche
Mons, 7000
Belgium

Rudy De Winne

UCLouvain ( email )

Chaussée de Binche, 151
Mons, 7000
Belgium
+3265323334 (Phone)

Eric Ghysels (Contact Author)

University of North Carolina Kenan-Flagler Business School ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States

University of North Carolina (UNC) at Chapel Hill - Department of Economics ( email )

Gardner Hall, CB 3305
Chapel Hill, NC 27599
United States
919-966-5325 (Phone)
919-966-4986 (Fax)

HOME PAGE: http://www.unc.edu/~eghysels/

Steve Raymond

University of North Carolina (UNC) at Chapel Hill - Department of Economics ( email )

Chapel Hill, NC 27599
United States

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