Prof. Catherine D’Hondt, Rudy De Winne and Eric Ghysels coauthored, with Steve Raymond, an article on Robo-investing published in the Journal of Empirical Finance.
"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.
Highlights
- We use brokerage accounts for a large cross-section of individual investors.
- Our data set covers 10 years and includes the financial crisis.
- We explore robo-investing strategies commonly used in the industry.
- The comparison sheds light on potential benefits of the robo-advising industry.
- We introduce idea of shadow robo-investors (Alter Egos) to assess potential benefits.
- We find that low education and low-income investors stand to gain significantly.
- During the crisis, robo-investors have a greater propensity to cash out of the market.
- Risk aversion bespoke Alter Egos outperform the generic Alter Egos.
- During the financial crisis AI Alter Egos are vastly better than passive ETF strategies."
Read more: Journal of Empirical Finance / DIAL Research Publications