“Our research showed that after using the robo-advisor, individuals were more inclined to invest in equities and follow the robo’s recommendations in rebalancing their portfolios towards their target allocations. These enhanced choices led to higher risk-adjusted returns.”
- Biases can significantly influence individuals’ investment decision-making, leading to questions about the role they should play in the management of their portfolios.
- Amundi’s research highlights that robo-advisors have a positive impact on behaviour and risk-adjusted returns in settings where individuals retain overall control (i.e. automatic portfolio rebalancing is not used)
- Investors’ attention, trading activities and risk-taking increases, resulting in greater returns (approx. +2% per annum) being achieved. Yet, the negative effect of not implementing automatic rebalancing is very small.
- The alerts sent by the robots are an effective tool in inducing individuals to rebalance their portfolios towards their target allocations (the probability of rebalancing increases by 29%).
- Investors are less likely to follow the robot’s recommendations during bear markets. The probability of rebalancing trades being triggered by alerts during a bear market (e.g. October - December 2018) is significantly lower (22.5%) than during other more buoyant market periods (48%).
You can now read the full whitepaper at the link below
