Robo-investment aversion

Abstract

In five experiments ( N = 3,828), we investigate whether people prefer investment decisions to be made by human investment managers rather than by algorithms (“robos”). In all of the studies we investigate morally controversial companies, as it is plausible that a preference for humans as investment managers becomes exacerbated in areas where machines are less competent, such as morality. In Study 1, participants rated the permissibility of an algorithm to autonomously exclude morally controversial stocks from investment portfolios as lower than if a human fund manager did the same; this finding was not different if participants were informed that such exclusions might be financially disadvantageous for them. In Study 2, we show that this robo-investment aversion manifests itself both when considering investment in controversial and non-controversial industries. In Study 3, our findings show that robo-investment aversion is also present when algorithms are given the autonomy to increase investment in controversial stocks. In Studies 4 and 5, we investigate choices between actual humans and an algorithm. In Study 4 –which was incentivized–participants show no robo-investment aversion, but are significantly less likely to choose machines as investment managers for controversial stocks. In contrast, in Study 5 robo-investment aversion is present, but it is not different across controversial and non-controversial stocks. Overall, our findings show a considerable mean effect size for robo-investment aversion ( d = –0.39 [–0.45, –0.32]). This suggests that algorithm aversion extends to the financial realm, supporting the existence of a barrier for the adoption of innovative financial technologies (FinTech).

Women oppose sin stocks more than men do

“…In this paper we ask whether this effect is greater in women. Preliminary evidence comes from our earlier study (Niszczota and Kaszás, 2020), in which participants assessed their attitudes toward fourteen controversial industries from Trinks and Scholtens (2017). While analyzing our data, we observed that women felt significantly less comfortable with the perspective of investing in each of the controversial industries (see Fig.…”

“…Such shifts in the composition of investors and corporate decision-makers might become tipping points, just as the number of "green" investors in the investor populationthat find severe pollution by a company to be unacceptable -might determine whether a company reforms or not (Heinkel et al, 2001). The left panel shows data from an earlier study (Niszczota and Kaszás, 2020) on which the current study is based on (14 sin industries from Trinks and Scholtens 2017), and the right panel shows data for the current study (7 sin industries with which participants felt the least comfortable with in the earlier study).…”

“…Moral appropriateness and/or comfort levels of holding stocks, in earlier study (A) and current study (B). Panel A shows data from our earlier study (Niszczota and Kaszás, 2020) that investigated 14 sin industries from Trinks and Scholtens (2017). Here, the sins are presented in descending order (from most to least controversial, based on the mean rating in that sample).…”

The effect of gender and parenting daughters on judgments of morally controversial companies

“…In Study 1, we have asked participants to consider investment in seven morally controversial industries (involved in abortion/abortifacients, adult entertainment, animal testing, controversial weapons, fur, gambling, tobacco) and seven conventional industries (involved in air freight/logistics, construction/engineering, household durables, marine transport, road/rail transport, semiconductors/semiconductor equipment, water utilities); these were used in previous research [ 4 , 21 ], but to aid readability the descriptions are provided in the S1 Appendix . More specifically, participants assessed the moral appropriateness of investing in industries ( Would it be morally appropriate if you invested in companies from the following industries ?…”

The effect of gender and parenting daughters on judgments of morally controversial companies

“…In Study 1, we have asked participants to consider investment in seven morally controversial industries and seven conventional industries used in previous research Niszczota and Kaszás, 2020). More specifically, participants assessed the moral appropriateness of investing in industries (Would it be morally appropriate if you invested in companies from the following industries?…”