Algorithm aversion in delegated investing

Maximilian Germann; Christoph Merkle

doi:10.1007/s11573-022-01121-9

Algorithm aversion in delegated investing

^*Corresponding author af dette arbejde

Institut for Økonomi

Publikation: Bidrag til tidsskrift/Konferencebidrag i tidsskrift /Bidrag til avis › Tidsskriftartikel › Forskning › peer review

7 Citationer (Scopus)

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Abstract

The tendency of humans to shy away from using algorithms—even when algorithms observably outperform their human counterpart—has been referred to as algorithm aversion. We conduct an experiment with young adults to test for algorithm aversion in financial decision making. Participants acting as investors can tie their incentives to either a human fund manager or an investment algorithm. We find no sign of algorithm aversion: participants care about returns, but do not have strong preferences which financial intermediary obtains these returns. Contrary to what has been suggested, participants are neither quicker to lose confidence in the algorithm after seeing it err. However, we find that participants’ inability to separate skill and luck when evaluating intermediaries slows down their migration to the algorithm.

Originalsprog	Engelsk
Tidsskrift	Journal of Business Economics
Vol/bind	93
Nummer	9
Sider (fra-til)	1691-1727
Antal sider	37
ISSN	0044-2372
DOI	https://doi.org/10.1007/s11573-022-01121-9
Status	Udgivet - nov. 2023

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10.1007/s11573-022-01121-9Licens: CC BY

s11573-022-01121-9Forlagets udgivne version, 1,01 MBLicens: CC BY

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Algorithm aversion in delegated investing

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