678
Views
6
CrossRef citations to date
0
Altmetric
Articles

Enacting a rational actor: Roboadvisors and the algorithmic performance of ideal types

ORCID Icon

References

  • Abolafia, M. Y. (1998). Markets as cultures: An ethnographic approach. The Sociological Review, 46(S1), 69–85.
  • Barber, B. & Odean, T. (2000). Trading is hazardous to your wealth: The common stock investment performance of individual investors. The Journal of Finance, 55(2), 773–806.
  • Barberis, N. & Huang, M. (2001). Mental accounting, loss aversion, and individual stock returns. The Journal of Finance, 56(4), 1247–1292.
  • Benartzi, S. & Thaler, R. H. (2007). Heuristics and biases in retirement savings behavior. Journal of Economic Perspectives, 21(3), 81–104.
  • Bernstein, P. L. (1992). Capital ideas: The improbable origins of modern Wall Street. New York, NY: The Free Press.
  • Beunza, D. & Stark, D. (2004). Tools of the trade: The socio-technology of arbitrage in a Wall Street trading room. Industrial and Corporate Change, 13(2), 369–400.
  • Beyhaghi, M. & Hawley, J. P. (2013). Modern portfolio theory and risk management: Assumptions and unintended consequences. Journal of Sustainable Finance & Investment, 3(1), 17–37.
  • Bhattacharya, U., Hackethal, A., Kaesler, S., Loos, B. & Meyer, S. (2012). Is unbiased financial advice to retail investors sufficient? Answers from a large field study. Review of Financial Studies, 25(4), 975–1032.
  • Biernacki, R. (2012). Reinventing evidence in social inquiry: Decoding facts and variables. New York, NY: Springer.
  • Borch, C. & Lange, A. C. (2016). High-frequency trader subjectivity: Emotional attachment and discipline in an era of algorithms. Socio-Economic Review, 15(1), 283–306.
  • Braun, B. (2016). From performativity to political economy: Index investing, ETFs and asset manager capitalism. New Political Economy, 21(3), 257–273.
  • Burke, J. V. (2017). Markowitz mean-variance portfolio theory. Nonlinear Optimization. Retrieved from https://sites.math.washington.edu/~burke/crs/408/fin-proj/mark1.pdf.
  • Cabannes, T., Vincentelli, M. A. S., Sundt, A., Signargout, H., Porter, E., Fighiera, V. & Bayen, A. M. (2017). The impact of GPS-enabled shortest path routing on mobility: A game theoretic approach 2. Berkeley, CA: University of California.
  • Calcagno, R. & Monticone, C. (2015). Financial literacy and the demand for financial advice. Journal of Banking & Finance, 50, 363–380.
  • Callon, M. (1986). The sociology of an actor-network: The case of the electric vehicle. In M. Callon, J. Law, A Rip (Ed.), Mapping the dynamics of science and technology (pp. 19–34). London, UK: Palgrave Macmillan.
  • Callon, M. (1998). Introduction: The embeddedness of economic markets in economics. The Sociological Review, 46(S1), 1–57.
  • Callon, M. (2005). Why virtualism paves the way to political impotence: A reply to Daniel Miller's critique of “The laws of the market”. Economic Sociology: European Electronic Newsletter, 6(2), 3–20.
  • Chen, Y. & Roscoe, P. (2017). Practices and meanings of non-professional stock-trading in Taiwan: A case of relational work. Economy and Society, 46(3-4), 576–600.
  • Coombs, N. (2016). What is an algorithm? Financial regulation in the era of high-frequency trading. Economy and Society, 45(2), 278–302.
  • Cremers, M., Ferreira, M. A., Matos, P. & Starks, L. (2016). Indexing and active fund management: International evidence. Journal of Financial Economics, 120(3), 539–560.
  • Deleuze, G. & Guattari, F. (1998). Kafka. Mexico City, Mexico: Ediciones Era.
  • DellaVigna, S. (2009). Psychology and economics: Evidence from the field. Journal of Economic Literature, 47(2), 315–372.
  • Espeland, W. N. & Sauder, M. (2007). Rankings and reactivity: How public measures recreate social worlds. American Journal of Sociology, 113(1), 1–40.
  • Fama, E. F. & French, K. R. (2010). Luck versus skill in the cross-section of mutual fund returns. The Journal of Finance, 65(5), 1915–1947.
  • Fehr, E. & Gächter, S. (2000). Cooperation and punishment in public goods experiments. American Economic Review, 90(4), 980–994.
  • Fichtner, J. & Heemskerk, E. M. (2018). The new permanent universal owners: Index funds, (im)patient capital, and the claim of long-termism. Retrieved from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3321597.
  • Foucault, M. (1977). Discipline and punish: The birth of the prison. New York, NY: Pantheon Books.
  • Fourcade, M. & Healy, K. (2017). Seeing like a market. Socio-Economic Review, 15(1), 9–29.
  • Gane, N. (2012). Max Weber and contemporary capitalism. New York, NY: Springer.
  • Garcia-Parpet, M. F. (2007). The social construction of a perfect market (pp. 21–53). Princeton, NJ: Princeton University Press.
  • Grinblatt, M. & Keloharju, M. (2001). What makes investors trade? The Journal of Finance, 56(2), 589–616.
  • Grüne-Yanoff, T. (2012). Paradoxes of rational choice theory. In S. Roeser (Ed.), Handbook of risk theory: Epistemology, decision theory, ethics, and social implications of risk (Vol. 1, pp. 499–516). New York, NY: Springer Science & Business Media.
  • Hardin, G. (1968). The tragedy of the commons. Science, 162(3859), 1243–1248.
  • Hayes, A. (2019). The active construction of passive investors: Roboadvisors and algorithmic ‘low-finance’. Socio-Economic Review. doi: 10.1093/ser/mwz046
  • Hekman, S. J. (1983). Weber’s ideal type: A contemporary reassessment. Polity, 16(1), 119–137.
  • Hoffmann, A. O., Post, T. & Pennings, J. M. (2013). Individual investor perceptions and behavior during the financial crisis. Journal of Banking and Finance, 37(1), 60–74.
  • Kahneman, D. & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47(2), 263–292.
  • Kalberg, S. (1994). Max Weber’s comparative-historical sociology. Chicago, IL: University of Chicago Press.
  • Kaplan, P. D. (1998). Asset allocation models using the Markowitz approach. In L. Siegel (Ed.), Frontiers of modern asset allocation (pp. 267–274). Hoboken, NJ: Wiley.
  • Knorr-Cetina, K. & Bruegger, U. (2002). Global microstructures: The virtual societies of financial markets. American Journal of Sociology, 107(4), 905–950.
  • Kocianski, S. (2016). The robo-advising report: Market forecasts, key growth drivers, and how automated asset management will change the advisory industry. BI Intelligence. Retrieved from https://insiderinc.auth0.com/login?state=g6Fo2SAzY1RKUFFlMEVwbUdjRUI0RVZnX2tsQWk0NXNPVkJNM6N0aWTZIG1tUW1aQnpuQmk0VFZrSmg3NExFOEpMU3hqUHJnaFUwo2NpZNkganAyb2NadEFNT01YNWlud2c2Q2RWeUtaZTBQQ3ppZXM&client=jp2ocZtAMOMX5inwg6CdVyKZe0PCzies&protocol=oauth2&response_type=code&scope=openid%20profile%20email&redirect_uri=https%3A%2F%2Fintelligence.businessinsider.com%2Fauth0%2Fcallback&audience=https%3A%2F%2Finsiderinc.auth0.com%2Fuserinfo
  • Lange, A. C. (2016). Organizational ignorance: An ethnographic study of high-frequency trading. Economy and Society, 45(2), 230–250.
  • Lange, A. C., Lenglet, M. & Seyfert, R. (2018). On studying algorithms ethnographically: Making sense of objects of ignorance. Organization, 26(4), 598–617.
  • Latour, B. (1999). Pandora’s hope: Essays on the reality of science studies. Cambridge, UK: Harvard University Press.
  • Lewis, M. (2015). Flash boys: Cracking the money code. New York, NY: Penguin Books.
  • Lopreato, J. & Alston, L. (1970). Ideal types and the idealization strategy. American Sociological Review, 35(1), 88–96.
  • MacKenzie, D. (2006). An engine, not a camera: How financial models shape markets. Cambridge, MA: MIT Press.
  • MacKenzie, D. (Ed.). (2009). Material markets: How economic agents are constructed. Oxford, UK: Oxford University Press.
  • MacKenzie, D. (2018). Material signals: A historical sociology of high-frequency trading. American Journal of Sociology, 123(6), 1635–1683.
  • MacKenzie, D. & Millo, Y. (2003). Constructing a market, performing theory: The historical sociology of a financial derivatives exchange. American Journal of Sociology, 109(1), 107–145.
  • MacKenzie, D. & Spears, T. (2014). ‘A device for being able to book P&L’: The organizational embedding of the Gaussian copula. Social Studies of Science, 44(3), 418–440.
  • Malkiel, B. G. (2005). Reflections on the efficient market hypothesis: 30 years later. The Financial Review, 40(1), 1–9.
  • Markowitz, H. (1952). Portfolio selection. The Journal of Finance, 7(1), 77–91.
  • Markowitz, H. (1959). Portfolio selection: Efficient diversification of investments. Hoboken, NJ: Wiley.
  • Markowitz, H. (1999). The early history of portfolio theory: 1600–1960. Financial Analysts Journal, 55(4), 5–16.
  • Mauss, M. (1960). Sociologie et anthropologie. Précédé d'une Introduction à l'oeuvre de Marcel Mauss par Claude Lévi-Strauss. Paris: Presses Universitaires de France.
  • Mullainathan, S., Noeth, M. & Schoar, A. (2012). The market for financial advice: An audit study. NBER Working Paper No. 17929. Cambridge, MA: National Bureau of Economic Research. Retrieved from https://www.nber.org/papers/w17929.
  • Mullainathan, S. & Thaler, R. H. (2000). Behavioral economics. NBER Working Paper No. 7948. Cambridge, MA: National Bureau of Economic Research. Retrieved from https://www.nber.org/papers/w7948
  • Odean, T. (1998). Are investors reluctant to realise their losses? The Journal of Finance, 53(5), 1775–1798.
  • Portes, A. (2010). Economic sociology: A systematic inquiry. Princeton, NJ: Princeton University Press.
  • Preda, A. (2017). Noise: Living and trading in electronic finance. Chicago, IL: University of Chicago Press.
  • Roscoe, P. (2015). ‘Elephants can’t gallop’: Performativity, knowledge and power in the market for lay-investing. Journal of Marketing Management, 31(1-2), 193–218.
  • Roscoe, P. & Chillas, S. (2014). The state of affairs: Critical performativity and the online dating industry. Organization, 21(6), 797–820.
  • Roscoe, P. & Howorth, C. (2009). Identification through technical analysis: A study of charting and UK non-professional investors. Accounting, Organizations and Society, 34(2), 206–221.
  • Schultheis, B. (2013). The Coffeehouse Investor: How to build wealth, ignore Wall Street, and get on with your life. New York, NY: Portfolio.
  • Schutz, A. (1967 [1932]). The phenomenology of the social world. Evanston, IL: Northwestern University Press.
  • Shepherd, S., Ko, A. & Kunz, B. (2018). Alternative risk premia: Valuable benefits for traditional portfolios. Newport Beach, CA: Research Affiliates, LLC.
  • Simon, H. A. (1978). Rationality as process and product of thought. American Economic Review, 68(1), 1–16.
  • Soe, A. & Poirier, R. (2017). SPIVA US Scorecard 2017. New York, NY: S&P Dow Jones Indices.
  • Srinivas, V. & Goradia, U. (2015, November 9). The future of wealth in the United States. New York: Deloitte Insights.
  • Svetlova, E. (2012). On the performative power of financial models. Economy and Society, 41(3), 418–434.
  • Svetlova, E. (2018). Financial models and society: Villains or scapegoats? Cheltenham, UK: Edward Elgar.
  • Swedberg, R. (2018). How to use Max Weber’s ideal type in sociological analysis. Journal of Classical Sociology, 18(3), 181–196.
  • Swensen, D. F. (2005). Unconventional success: A fundamental approach to personal investment. New York, NY: Simon and Schuster.
  • Thaler, R. H. & Sunstein, C. R. (2009). Nudge: Improving decisions about health, wealth, and happiness. New York, NY: Penguin.
  • Tobin, J. (1958). Liquidity preference as behavior towards risk. The Review of Economic Studies, 25(1), 65–86.
  • Vukovic, A. & Bjerknes, L. (2017). Automated advice: A portfolio management perspective on robo-advisors (Master’s thesis). Norwegian University of Science and Technology.
  • Weber, M. (1978 [1922]). Economy and society: An outline of interpretive sociology (trans. E Fischoff et al.) 2 vols. Berkeley, CA: University of California Press.
  • Weber, M. (1981 [1913). Some categories of interpretive sociology. The Sociological Quarterly, 22(2), 151–180.
  • Weiss, H. (2018). Popfinance: From the economic man to the Swabian housewife. HAU: Journal of Ethnographic Theory, 8(3), 455–466.
  • Whitehead, A. N. (1992 [1911]). An introduction to mathematics. London, NY: Williams & Norgate.
  • Zheng, Y. T., Yan, S., Zha, Z. J., Li, Y., Zhou, X., Chua, T. S. & Jain, R. (2013). GPSView: A scenic driving route planner. ACM Transactions on Multimedia Computing, Communications, and Applications (TOMM), 9(1), 3.

Reprints and Corporate Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

To request a reprint or corporate permissions for this article, please click on the relevant link below:

Academic Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

Obtain permissions instantly via Rightslink by clicking on the button below:

If you are unable to obtain permissions via Rightslink, please complete and submit this Permissions form. For more information, please visit our Permissions help page.