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

In: Robo-Advisory

Author

Listed:
  • Peter Scholz

    (Hamburg School of Business Administration)

  • David Grossmann

    (Otto M. Schroeder Bank AG)

  • Joachim Goldberg

    (Goldberg & Goldberg)

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.

Suggested Citation

  • Peter Scholz & David Grossmann & Joachim Goldberg, 2021. "Robo Economicus? The Impact of Behavioral Biases on Robo-Advisory," Palgrave Studies in Financial Services Technology, in: Peter Scholz (ed.), Robo-Advisory, chapter 0, pages 53-69, Palgrave Macmillan.
    • Handle: RePEc:pal:psincp:978-3-030-40818-3_4
    DOI: 10.1007/978-3-030-40818-3_4
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