To Advise, or Not to Advise — How Robo-Advisors Evaluate the Risk Preferences of Private Investors

In a joint work with Michael Tertilt, an HSBA alumnus of MBA Corporate Management, we analyze the current quality of robo-advice.

Abstract

Robo-advisors promise efficient, rational, and transparent investment advisory. We analyze how robo-advisors ascertain their user’s risk tolerance and which equity exposure is derived from the individual risk profile. Our findings indicate significant differences in the quality of offered investment advice. On average, robo-advisors ask relatively few questions in their user’s risk profile assessment, and it is particularly surprising that some of the questions seem not to have any impact on the risk categorization. Moreover, the recommended equity exposure is relatively conservative.

Citation

Michael Tertilt & Peter Scholz (2017): To Advise, or Not to Advise — How Robo-Advisors Evaluate the Risk Preferences of Private Investors. SSRN Working Paper.

Better The Devil You Know Than The Devil You Don’t — Financial Crises between Ambiguity Aversion and Selective Perception

Together with my Ph.D. students David and Sinan, we have written an article for the second edition of the International Conference on European Integration and Sustainable Development.

Abstract

During financial crises, market participants are pressurized and presumably prone to emotional biased decisions. We use the Economic Policy Uncertainty Indicator and Dow Jones Industrial Average as well as Nikkei 225 GARCH volatilities to test for ambiguity aversion and selective perception of investors. For most crises, we find a significant link between uncertainty and market volatility. However, with respect to ambiguity aversion, the causality differs between crises indicating that investors may not always be driven by uncertainty. Regarding selective perception, we find significant results for the Dot.Com and subprime crises, but not for the Japanese asset price bubble and the Asian crisis.

Citation

Peter Scholz, David Großmann & Sinan Krückeberg (2017): Better The Devil You Know Than The Devil You Don’t — Financial Crises between Ambiguity Aversion and Selective Perception. SSRN Working Paper.

Bank Regulation — One Size Does Not Fit All

Abstract

Bank business models show diverse risk characteristics, but these differences are not sufficiently considered in Pillar 1 of the regulatory framework. Even if the business model is analyzed within the European SREP, global Pillar 2 approaches differ and could lead to competitive disadvantages. Using the framework of Miles et al. (2012), we examine a dataset of 115 European banks which is split into retail, wholesale, and trading banks. We show that shifts in funding structure affect business models differently. Consequently, a “one size” approach in Pillar 1 for the regulation of banks does not fit all.

Citation

David Großmann & Peter Scholz (2017): Bank Regulation — One Size Does Not Fit All. Journal of Applied Finance & Banking (forthcoming).

HSBA Study Trip 2017 – Hong Kong

 Photo by Base64 (Own work) [CC BY-SA 3.0], via Wikimedia Commons

In cooperation with my Ph.D. student Sinan Tıraş  I plan to travel to Hong Kong in October 2017 – if you elect this destination.

Update Feb 15th, 2017: The trip is booked, so we are happy to travel to Hong Kong with you! A few spots are still available

Since Sinan has lived in Hong Kong, he has written the following  study trip description: Weiterlesen

World Finance Conference 2017: To Advise, or Not to Advise — How Robo-Advisors Evaluate the Risk Preferences of Private Investors

Photo by trolvag [CC BY-SA 3.0], via Wikimedia Commons

From July 26th until 28th, the World Finance Conference will take place at Cagliari University in Sardinia, Italy. I am invited to present the findings of a joint work with Michael Tertilt, an alumnus of HSBA’s MBA program. I am really looking forward to meet and greet!

Abstract

Robo-advisors promise efficient, rational, and transparent investment advisory. We analyze how robo-advisors ascertain their user’s risk tolerance and which equity exposure is derived from the individual risk profile. Our findings indicate significant differences in the quality of offered investment advice. On average, robo-advisors ask relatively few questions in their user’s risk profile assessment, and it is particularly surprising that some of the questions seem not to have any impact on the risk categorization. Moreover, the recommended equity exposure is relatively conservative.

Visit Conference Site

HSBA Exkursion nach London

London calling! Mit 14 HSBA Studierenden begebe ich mich vom 3. bis 7. Oktober in die aktuelle Nummer Eins der Global Financial Centres. Auch dieses Jahr wartet ein spannendes Programm auf uns: Wir besuchen das King’s College, das Imperial War Museum, die Royal Bank of Scotland, Veritas Investment, Bloomberg, Lloyds, Alpha Insurance, TokioKiln Group, Bank of England Museum und die HSBC. Außerdem steht eine Pub Tour an. Ich bin gespannt wie die Stadt den Brexit verkraftet — zumindest die Preise sind dank des Rekordtiefs des Britischen Pfund vergleichsweise günstig.

HSBA Graduates 2013-2016

Foto: Roland Magunia

Congratulations Graduates 2016 at HSBA!

Especially, congrats to „my classes“:

Banking, B.Sc.

Logistics & Maritime Management, B.Sc.

Financial Markets & Risk Management, MBA

It has been a great time with you! I wish you all the best for your future endeavors!