AI is not careful: approach to the stock market and preference for AI advisor

Abstract

Purpose

Financial institutions actively seek to leverage the capabilities of artificial intelligence (AI) across diverse operations in the field. Especially, the adoption of AI advisors has a significant impact on trading and investing in the stock market. The purpose of this paper is to test whether AI advisors are less preferred compared to human advisors for investing and whether this algorithm aversion diminishes for trading.

Design/methodology/approach

The four hypotheses regarding the direct and indirect relationships between variables are tested in five experiments that collect data from Prolific.

Findings

The results of the five experiments reveal that, for investing, consumers are less likely to use AI advisors in comparison to human advisors. However, this reluctance to AI advisors decreases for trading. The author identifies the perceived importance of careful decision-making for investing and trading as the psychological mechanism. Specifically, the greater emphasis on careful decision-making in investing, as compared to trading, leads to consumers’ tendency to avoid AI advisors.

Originality/value

This research is the first to investigate whether algorithm aversion varies based on whether one’s approach to the stock market is investing or trading. Furthermore, it contributes to the literature on carefulness by exploring the interaction between a stock market approach and the lay belief that algorithms lack the capability to deliberate carefully.