Department of Economics and Business Economics

Algorithm Aversion in Financial Investing

Research output: Working paper/Preprint Working paperResearch

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 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: Investors care about returns, but do not have strong preferences which
intermediary obtains these returns. Contrary to what has been suggested, investors
are also not quicker to lose confidence in the algorithm after seeing it err. However,
we find that investors are unable to fully separate skill and luck when evaluating
either intermediary.
Original languageEnglish
Publication statusPublished - Nov 2019

    Research areas

  • Algorithm aversion, Financial Technology, Asset management, Delegated investment

See relations at Aarhus University Citationformats

ID: 176879327