The active construction of passive investors: Roboadvisors and algorithmic 'low-finance'

Adam S. Hayes*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

13 Scopus citations

Abstract

How does algorithmic finance operate in society as it crosses the threshold into the hands of lay investors? This article builds on original ethnographic research into a new class of algorithmic trading programs known as 'roboadvisors'-inexpensive, automated, digital financial platforms that enable ordinary people to invest very small minimum amounts and that rely to a large extent on passive, index strategies that follow the prescripts of Modern Portfolio Theory. The main argument of the article is that roboadvisors, representing an ethos of 'low-finance', are actively constructing passive investors by disciplining them through technologies that embody canonical models of financial economics. Roboadvisors and their algorithms reconfigure their users and objectify them through automating investment decisions and enforcing a principle of 'don't do' vis-à-vis the market. Implications that bear on agency, market structure and regulatory regimes are discussed.

Original languageAmerican English
Pages (from-to)83-110
Number of pages28
JournalSocio-Economic Review
Volume19
Issue number1
DOIs
StatePublished - 1 Jan 2021
Externally publishedYes

Bibliographical note

Publisher Copyright:
© 2021 The Author(s) 2019. Published by Oxford University Press and the Society for the Advancement of Socio-Economics. All rights reserved.

Keywords

  • G11
  • O33
  • Z13
  • algorithms
  • economic sociology
  • financial markets
  • financial services
  • high-frequency trading
  • roboadvisors

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