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Robo-Advising

Author

Listed:
  • Francesco D'Acunto
  • Alberto G. Rossi

Abstract

In this work, we first discuss the limitations of traditional financial advice, which led to the emergence of robo-advising. We then describe the main features of robo-advising and propose a taxonomy of robo-advisors based on four defining dimensions---personalization, discretion, involvement, and human interaction. Building on these premises, we delve into the theoretical and empirical evidence on the design and effects of robo-advisors on two major sets of financial decisions, that is, investment choices (for both short- or long-term horizons) and the allocation of financial resources between spending and saving. We conclude by elaborating on five broadly open issues in robo-advising, which beget theoretical and empirical research by scholars in economics, finance, psychology, law, philosophy, as well as regulators and industry practitioners.

Suggested Citation

  • Francesco D'Acunto & Alberto G. Rossi, 2020. "Robo-Advising," CESifo Working Paper Series 8225, CESifo.
  • Handle: RePEc:ces:ceswps:_8225
    as

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    References listed on IDEAS

    as
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    4. Francesco D’Acunto & Nagpurnanand Prabhala & Alberto G Rossi, 2019. "The Promises and Pitfalls of Robo-Advising," Review of Financial Studies, Society for Financial Studies, vol. 32(5), pages 1983-2020.
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    More about this item

    Keywords

    FinTech; behavioral economics; algorithmic advice; A1; financial regulation; financial literacy;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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