Title Assessment of the efficiency of investment robo-advisory /
Translation of Title Investicijų automatizuotų patarimų efektyvumo įvertinimas.
Authors Mota Salinas, Gustavo Adolfo
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Pages 79
Keywords [eng] Fintech, Robo-Advisory, Financial Innovation, Wealth Management, Automated Investment, Asset Allocation, Investment Decision, Japanese Fund Market, Japanese Robo-Advisor, Benchmark Construction, Efficiency Measurement, Automated Investment Advisory, Investment Strategies, Tracking Error, Financial Technology, Investment Returns, Portfolio Diversification, Market Efficiency, Financial Decision-Making, Algorithms
Abstract [eng] The purpose of this master thesis is to assess the efficiency of Robo-Advisors, particularly in comparison to diverse benchmarks and markets, as well as on different components of their returns and risks. The work consists of three main parts; the conceptual and theoretical background of Fintech and Robo-Advisors, the development of a methodology for this task, and the empirical results obtained. Conclusions and further recommendations are also provided for this work. The theoretical framework reviews and analyze the existing research and conceptual backgrounds on the topic, it starts by reviewing conceptual definitions, characteristics of Fintech and Robo-Advisory, taxonomy and evolution, it later provides the groundwork for a classification. Then, a comprehensive documental review is performed on the current state of Robo-Advisory, by summarizing the characteristics of worldwide companies that provide such services. Finally, methodologies for efficiency evaluation are reviewed, commented, and contrasted, the later research works find initial evidence of enhancements in efficiency. In the second part a new methodology for efficiency assessment is proposed, we start by describing the case study of a prominent Robo-Advisor in Japan, we describe the available data and the decomposition of the returns into a tactical and strategical component for return, as well as the risk metrics for evaluation. We also describe the methodology for constructing a composite benchmark for the first part of the return evaluation and the structure of the data taken from the Japanese Fund Association for the latter part of the return evaluation. The third part provides the results for our tests: The comprehensive analysis of Robo-Advisors in this study focused on both tactical and strategic levels, revealing that, under diverse market conditions, these tools did not significantly outperform a straightforward fixed-weight asset holding strategy. The study emphasizes the importance of considering not only returns but also understanding the strategies employed by Robo-Advisors in navigating dynamic market scenarios. The lack of rejection of the null hypothesis at both levels prompts further exploration into the value proposition and efficiency of Robo-Advisors in the broader financial landscape. Additionally, the comparison with the Japanese Fund Market indicated no statistically significant differences in asset management decisions, emphasizing the need for a deeper understanding of the decision-making processes and risk management strategies employed by Robo-Advisors. The study lays the foundation for future research recommendations, suggesting a broader focus on aspects like product design, diversification, channel dynamics, and customer experiences to comprehensively understand the evolving dynamics of these innovative financial tools in rapidly changing markets.
Dissertation Institution Vilniaus universitetas.
Type Master thesis
Language English
Publication date 2024