Events

Professor Hongjun Yan
Professor of Finance
Richard H. Driehaus Chair in Behavioral Finance
DePaul University

Personalized services have traditionally been difficult to automate and therefore costly. Modern technology, such as robo-advising, promises to change this but also introduces new challenges. Robo-advisors typically make investment recommendations based on surveys of clients’ preferences. As a result, biases induced by these surveys can become embedded in the algorithmic recommendations and influence investors’ financial decisions. To examine this conjecture, we conduct two studies. First, we administer a nationwide survey of experienced U.S. investors and show that the response-order effect—the influence of the order of listed choices on respondents’ answers—applies to survey questions commonly used by robo-advisors. Second, in collaboration with a leading robo-advisor in China, we conduct a preregistered RCT and show that, despite the large financial stakes involved, the response-order effect significantly alters both the roboadvisor’s risk assessments and its clients’ actual investment decisions, raising new ethical concerns in the FinTech era.