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The Performance and Asset Allocation of German Robo-Advisors

Author

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  • Michael Puhle

    (Department of Finance, Corvinus University Budapest, Hungary)

Abstract

After a short historical perspective on the emergence of robo-advisors and an overview of how they manage other people’s money, we evaluate the performance of five German robo-advisors in the period between May 2015 and December 2018. Performance tests are conducted using Sharpe’s (1966) and Jensen’s (1968) performance methodologies. We also employ the returns-based style analysis of Sharpe (1992) to determine the exposure of robo-advisors to different non-overlapping asset classes. We report the following findings: First, no robo-advisor was able to beat the benchmark before or after considering fees. Second, robo-advisor performance varies greatly in the sample period even for portfolios that should appeal to clients with similar risk preferences. Third, these performance differences remain unexplained after accounting for the different asset allocations.

Suggested Citation

  • Michael Puhle, 2019. "The Performance and Asset Allocation of German Robo-Advisors," Society and Economy, Akadémiai Kiadó, Hungary, vol. 41(3), pages 331-351, September.
    • Handle: RePEc:aka:soceco:v:41:y:2019:i:3:p:331-351
    Note: This work was supported by the Hungarian National Research, Development and Innovation Office under project 2018-1.3.1-VKE.
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    References listed on IDEAS

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    1. Michael C. Jensen, 1968. "The Performance Of Mutual Funds In The Period 1945–1964," Journal of Finance, American Finance Association, vol. 23(2), pages 389-416, May.
    2. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
    3. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
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    Cited by:

    1. Bernd Scherer & Sebastian Lehner, 2023. "Trust me, I am a Robo-advisor," Journal of Asset Management, Palgrave Macmillan, vol. 24(2), pages 85-96, March.

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    More about this item

    Keywords

    robo-advisor; robo-advise; FinTech; style analysis;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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