The 258th Wenlan Financial Forum

Abstract:
This study examines the impact of robo-advising on personal wealth management based on a unique data set of individual investors’ investment accounts. Robo-advising portfolios have better performance, measured as lower volatility and higher Sharpe ratio, than investors’ self-directed portfolios. More importantly, we find evidence that robo-advising has a spillover effect on its adopters: it improves their sophistication. Investors have more diversified portfolios and exhibit fewer behavioral biases in portfolio management and fund selection in their self-directed accounts after adopting robo-advising. This spillover effect is more prominent for adopters that interact with the service more actively and that used to be less rational beforehand. We also find evidence that adopters learn from robo-advisors by simply intimating the robo-advisor' s portfolios or strategies. These findings indicate that robo-advising effectively plays a role in educating investors through repeatedly interacting with its adopters and setting investment models that are easy to follow. Collectively, this study not only solidifies the fact that robo-advising improves investors’ investment performance, but also provides large-sample non-laboratory evidence that robo-advising can serve as a financial education tool that improves investor sophistication.

Speaker Introduction:
Conghui Hu is an associate professor at the School of Economics and Business Administration of Beijing Normal University; Ph.D. in Finance, Guanghua School of Management, Peking University; Bachelor of Economics in Financial Engineering from Wuhan University. He was an associate professor at the International Business School of the University of International Business and Economics and a visiting scholar at the Columbia University Business School. His research expertise is in Behavioral Finance, Capital Market and Corporate Finance, focusing on understanding asset prices and corporate financial decisions from the perspectives of investor behavior bias and capital market institutional design. He has published more than 20 papers in Chinese and English academic journals such as Journal of Corporate Finance, Journal of Banking & Finance, Journal of Financial Markets, Economic Research Journal, Management World, Journal of Financial Research, and Accounting Research. A number of his first-author papers have been reproduced in full text by the National People's Congress (10 papers in total).