The application of blockchain and robo-advisors in wealth management literature review

Ziyi Li

doi:10.54254/2754-1169/7/20230260

Research Article

Open access

Published on 13 September 2023

Download pdf

Li,Z. (2023). The application of blockchain and robo-advisors in wealth management literature review. Advances in Economics, Management and Political Sciences,7,397-406.

Export citation

The application of blockchain and robo-advisors in wealth management literature review

Ziyi Li *^,1,

¹ Beijing Jiaotong University

* Author to whom correspondence should be addressed.

https://doi.org/10.54254/2754-1169/7/20230260

Abstract

This paper aims to study the blockchain in the field of financial ecology as the carrier, optimize the consensus mechanism, and use intelligent consulting as an analytical means to provide investors with an objective, low-cost asset allocation portfolio. This article begins with an introduction to the features of blockchain decentralization and tamper-proof execution of algorithms, how proof-of-work works, and how tokens can improve welfare and reduce user base volatility. The paper then introduces how robo-advisors work and how they develop. Finally, this paper reviews existing research models on robo-advisors, from the traditional mean-variance model based on Markowitz to the jump-diffusion, regime-switching model, and the Pi portfolio management model that does not require quantifying risk preference coefficients, which this paper discusses and seeks to explore the advantages and limitations between the different models. Based on the existing research gaps, the directions that digital finance can expand in the future are discussed.

Keywords

blockchain, token, robo-advising

View pdf

References

[1]. President’s Advisory Committee on Financial Literacy (PACFL) Annual Report to the President: Executive Summary 2008 (2008).

[2]. Lusardi, A. and O.S. Mitchell. The Economic Importance of Financial Literacy: Theory and Evidence, Journal of Economic Literature 52(1): 5-44. http://www.aeaweb.org/articles.php?doi=10.1257/jel.52.1.5 21. (2014).

[3]. Agarwal, S., J. Driscoll, X. Gabaix, and D. Laibson. ‘The Age of Reason: Financial Decisions over the Lifecycle with Implications for Regulation’, Brookings Papers on Economic Activity 2:51-117 (2009).

[4]. Jill E. F, Marion L., and John A. Turner. ‘The Emergence of the Robo-advisor’ https://pensionresearchcouncil.wharton.upenn.edu/wp-content/uploads/2018/12/WP-2018-12-Fisch-et-al.pdf lasted accessed 2018/12

[5]. Cong L. W, He Z. G. and Li J. S. Decentralized Mining in Centralized Pools. SSRN Electronic Journal (2018).

[6]. Cong L. W, He Z. G. Blockchain Disruption and Smart Contracts. SSRN Electronic Journal (2017).

[7]. Cong L. W., Li Y., and Wang N. Dynamic Pricing of Tokens. SSRN Electronic Journal (2018).

[8]. Cvitanic J., Kou S., Wan X.W. and Williams K. Pi Portfolio Management: Reaching Goals while Avoiding Losses. SSRN Electronic Journal (2021).

[9]. Jill E. F, Marion L., and John A. Turner. ‘The Emergence of the Robo-advisor’ https://pensionresearchcouncil.wharton.upenn.edu/wp-content/uploads/2018/12/WP-2018-12-Fisch-et-al.pdf lasted accessed 2018/12

[10]. Report on Digital Investment Advice, FINRA (2016).

[11]. SEC Division of Investment Management Issues Guidance Update for Robo-Advisers (2017)

[12]. Markowitz, Harry M., and Erik L. van Dijk. “Single-Period Mean: Variance Analysis in a Changing World.” Financial Analysts Journal 59, no. 2 (2003): 30–44.

[13]. PriceMetrix State of Retail Wealth Management, 10th Annual Report. Wealthfront Investment Methodology White Paper (2020).

[14]. Dai. M, Jin. H.Q, Kou. S and Xu. Y. H. A Dynamic Mean-Variance Analysis for Log Returns (2017).

[15]. Quigley. L. Statistical Analysis of the Log Returns of Financial Assets (2008).

[16]. Bj¨ork, T., Khapko, M., and Murgoc, A. On time-inconsistent stochastic control in continuous time. Finance and Stochastics, 21(2), 331–360 (2017).

[17]. Dai. M, Jin. H.Q, Kou. S and Xu. Y. H. Robo-Advising: A Dynamic Mean-Variance Approach (2017).

[18]. Heston, S. L. A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options. The Review of Financial Studies 1993 Volume 6, number 2, pp.327-343 (1993).

[19]. Carr, Peter and Wu, L. 2002. Time-changed Levy processes and option pricing working paper

[20]. Liu, J. (2001). Dynamic portfolio choice and risk aversion. Working Paper, UCLA, SSRN -id287095.

[21]. Chen. X.L, Shen. J. Regime-Switching Models: Capturing Structural Changes in Time Series (2018). https://www.sas.com/content/dam/SAS/support/en/sas-global-forum-proceedings/2018/1879-2018.pdf

[22]. Hamilton, James D. “A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle,” Econometrica 57, 357-384 (1989).

[23]. Chacko, G., and Viceira, L. M. Dynamic consumption and portfolio choice with stochastic volatility in incomplete markets (2005).

Cite this article

Li,Z. (2023). The application of blockchain and robo-advisors in wealth management literature review. Advances in Economics, Management and Political Sciences,7,397-406.

Data availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

Disclaimer/Publisher's Note

The statements, opinions and data contained in all publications are solely those of the individual author(s) and contributor(s) and not of EWA Publishing and/or the editor(s). EWA Publishing and/or the editor(s) disclaim responsibility for any injury to people or property resulting from any ideas, methods, instructions or products referred to in the content.

About volume

Volume title: Proceedings of the 2nd International Conference on Business and Policy Studies

Conference website: https://2023.confbps.org/

ISBN：978-1-915371-41-6(Print) / 978-1-915371-42-3(Online)

Conference date: 26 February 2023

Editor：Canh Thien Dang, Javier Cifuentes-Faura

Series: Advances in Economics, Management and Political Sciences

Volume number: Vol.7

ISSN：2754-1169(Print) / 2754-1177(Online)

© 2024 by the author(s). Licensee EWA Publishing, Oxford, UK. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license. Authors who publish this series agree to the following terms:
1. Authors retain copyright and grant the series right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this series.
2. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the series's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial publication in this series.
3. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See Open access policy for details).