PreFER: Interactive Robo-Advisor with Scoring Mechanism

2026-10-02

AI Summary

This study addresses the limitations of traditional robo-advisors in accurately learning personalized risk preferences from user ratings and dynamically adapting to market conditions. To this end, we propose an interactive intelligent investment advisory framework based on inverse reinforcement learning. Methodologically, we introduce a discrete-time predictable forward exploration reward (PreFER) process, which integrates von Neumann acceptance-rejection sampling with constant absolute risk aversion (CARA) utility theory to efficiently transform noisy ratings into optimal policy distributions. Experimental results demonstrate that the proposed framework can accurately identify clients’ risk aversion levels despite noisy feedback. Furthermore, it consistently generates dynamic investment recommendations aligned with the learned preferences as market conditions evolve.

Abstract

We propose an interactive robo-advising framework that learns personalized risk preferences from scores provided by clients. The resulting preference-learning problem is closely related to inverse reinforcement learning (IRL), as the robo-advisor infers the client's latent reward specification from feedback. The robo-advisor interacts with clients iteratively as follows. At each interaction time, the advisor generates investment advice based on the optimal policy distribution derived from an inferred personalized risk preference. The client scores the advice. The advisor updates its assessment of the client's risk preference based on the feedback. This learning procedure motivates us to investigate discrete-time Predictable Forward Exploratory Reward (PreFER) processes and derive an exploratory investment strategy. By interpreting the score as the acceptance probability of a piece of advice, our inverse learning procedure learns the client's exploratory investment distribution using the acceptance-rejection method pioneered by von Neumann. Under CARA preferences, we show that, even though the scores contain noise, the robo-advisor can identify the client's current risk aversion after a sufficiently large number of interactions. The PreFER process then carries the learned preference forward and generates future recommendations under updated market conditions.

Problem

• Robo-Advisor
• Risk Preference Learning
• Inverse Reinforcement Learning
• Personalized Investment
• Scoring Mechanism

Innovation

• Interactive Robo-Advisor
• Inverse Reinforcement Learning
• Predictable Forward Exploratory Reward (PreFER)
• Acceptance-Rejection Method
• Risk Preference Learning