Investment Strategy Based on Observed Behaviour
BBVA Asset Management, the investment management arm of BBVA Group, has adopted a unique approach to portfolio construction and asset allocation that integrates behavioral economics and artificial intelligence (AI). This innovative framework aims to enhance objectivity while recognizing human psychology in decision-making.
Behavioral Economics Integration
Jaime Martínez, global head of asset allocation at BBVA Asset Management, has led the transformation of the team's approach, drawing from behavioral economics. The asset manager uses a process guided by behavioral economics principles to recognize and control for human psychological biases. The methodology divides investment decisions into two key horizons: a long-term strategic allocation (3–5 years) based on valuation, and a shorter-term tactical allocation (1–9 months) driven by dynamic signals, enabling systematic responses to market conditions.
Quantitative and AI Tools
While human judgment remains central, BBVA uses quantitative tools to reinforce discipline and consistency in portfolio decisions. These tools help assess risks, valuations, and market momentum by filtering and processing relevant data, effectively supporting the tactical allocation and stock selection process. AI-driven momentum signals play a role in adjusting portfolio holdings based on current market drivers, ensuring portfolios adapt dynamically rather than sticking to static styles.
Transparency and Diversification
The process emphasizes transparent, methodical asset allocation with diversification across different return sources. Risk controls and constraints on sector, country, and individual stock weights are systematically applied, with daily risk monitoring to maintain disciplined management amid volatility.
Responsible AI and Data-driven Innovation
BBVA has also undertaken advanced research partnerships on responsible AI to address ethical and technical challenges in automated decision-making. This includes efforts to correct data biases and integrate ethical frameworks, reflecting a deep commitment to trustworthy AI in investment and broader financial services.
In summary, BBVA Asset Management combines behavioral economics insights to guard against investor biases with AI-enabled quantitative tools that provide disciplined, transparent, and adaptive portfolio construction and asset allocation decisions. This hybrid human-machine approach aims to improve decision objectivity while allowing flexibility to respond to evolving markets.
[1] BBVA Asset Management. (n.d.). BBVA Asset Management. Retrieved from https://www.bbvaam.com/
[2] BBVA Asset Management. (2021). BBVA Asset Management Introduces Goal-Based Model Portfolios. Retrieved from https://www.bbvaam.com/en/news/bbva-asset-management-introduces-goal-based-model-portfolios
[3] BBVA Research. (2020). BBVA Research and MIT Media Lab Launch the AI for Humanity Initiative. Retrieved from https://www.bbva.com/en/news-and-media/press-releases/bbva-research-and-mit-media-lab-launch-the-ai-for-humanity-initiative-20200929-000000/
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