Trust in AI

Narrative review of the research concerning the link between behavioral biases, investment decision making, and the rise of AI-powered financial technology is presented in this paper. In particular, attention is paid to the impact that the key concepts of behavioral finance such as overconfidence, herding, loss aversion, anchoring, mental accounting, and regret aversion have on the behavior of the investors. Then, the paper proceeds to the analysis of the rising popularity of robo advisors and other AI-powered financial solutions, underlining the importance of investor's trust to these technologies for their adoption and effectiveness. Algorithmic transparency and explainability of AI become particularly notable factors influencing confidence and adoption of AI-generated financial recommendations. The reactions of the investors to both behavioral biases and technology-enabled financial services are considered from the perspective of financial literacy of the investors. The paper suggests that these literacies might help investors cope with the digital nature of finances and make more effective decisions based on data from earlier researches. There is also a mention of the differences between demographic groups, like age or gender. The paper analyzes several researches to reveal common understanding, debates, and gaps in this field not to test any hypothesis. It should be noted that the impact of behavioral biases, investor’s trust, financial literacy, and the development of artificial intelligence in finance is underlined in the conclusion of the paper.