Do AI-Powered Mutual Funds Perform Better?

22 Pages Posted: 14 Dec 2021

See all articles by Rui Chen

Rui Chen

University of Macau - Department of Finance and Business Economics

Jinjuan Ren

University of Macau

Date Written: November 3, 2021

Abstract

We evaluate the performance of artificial intelligence (AI)-powered mutual funds. We find that these funds do not outperform the market per se. However, a comparison shows that AI-powered funds significantly outperform their human-managed peer funds. We further show that the outperformance of AI funds is attributable to their lower transaction cost, superior stock-picking capability, and reduced behavioral biases.

Keywords: Artificial Intelligence; Mutual fund performance; Behavioral biases

JEL Classification: G11, G23, G41

Suggested Citation

Chen, Rui and Ren, Jinjuan, Do AI-Powered Mutual Funds Perform Better? (November 3, 2021). Finance Research Letters, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3979738

Rui Chen (Contact Author)

University of Macau - Department of Finance and Business Economics ( email )

Macau

Jinjuan Ren

University of Macau ( email )

Room 4079, E22, Faculty of Business Administration
University of Macau
Taipa, Taipa Nil
Macau
(853) 8822-4185 (Phone)

HOME PAGE: http://www.umac.mo/fba/staff/susanren.html

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