Enacting the rational investor: Non-professional market participants and the performativity of roboadvisors

• In Event: 4442 - The Economic Sociology of Culture and Technology

Abstract

Non-professional (lay) investors appear to be the antithesis of rational economic man. They have been cast as less-informed, less-skilled, and less-knowledgeable than professional market practitioners, with an abundance of empirical evidence that they tend to lose money in the market, on average. This study builds the case that a new class of algorithmic financial advisor, commonly known as roboadvisors, enact non-professional investors as rational market actors. This is achieved through algorithmic devotion to modern portfolio theory (MPT), which the roboadvisors embody, automate, and perform, conjuring Homo economicus into existence. Through this exposition, I further show roboadvisors to be a particular case of economic performativity where the model performs the actor, rather than actors performing the market through the widespread use of a model.

Author

• Adam Hayes, University of Wisconsin-Madison