Andrew W. Lo

Jillian Ross, Yoon Kim, Andrew W. Lo

Humans are not homo economicus (i.e., rational economic beings). As humans, we exhibit systematic behavioral biases such as loss aversion, anchoring, framing, etc., which lead us to make suboptimal economic decisions. Insofar as such biases may be embedded in text data on which large language models (LLMs) are trained, to what extent are LLMs prone to the same behavioral biases? Understanding these biases in LLMs is crucial for deploying LLMs to support human decision-making. We propose utility theory-a paradigm at the core of modern economic theory-as an approach to evaluate the economic biases of LLMs. Utility theory enables the quantification and comparison of economic behavior against benchmarks such as perfect rationality or human behavior. To demonstrate our approach, we quantify and compare the economic behavior of a variety of open- and closed-source LLMs. We find that the economic behavior of current LLMs is neither entirely human-like nor entirely economicus-like. We also find that most current LLMs struggle to maintain consistent economic behavior across settings. Finally, we illustrate how our approach can measure the effect of interventions such as prompting on economic biases.

Jillian Ross, Eric So, Andrew W. Lo

Financial misconceptions carry direct economic costs, from panic selling to equity market avoidance, yet they are notoriously resistant to correction. Traditional financial literacy interventions are constrained by cost, reach, and a persistent gap between knowledge and behavioral change. Across three pre-registered studies, we find that purposefully designed LLMs can durably correct financial misconceptions. Critically, two factors are necessary for this effect. First, corrective intent: LLMs prompted only to discuss a misconception produce corrections no better than unassisted self-reflection, and undirected LLM conversations can actively entrench misconceptions. Second, recipient receptivity: financial concepts are often foreign to the investors who misapply them, and LLM responses pitched below a participant's financial sophistication are judged as less credible and produce substantially weaker corrections. LLMs thus offer a scalable alternative to traditional financial literacy intervention, but only when designed with both factors in mind.

Jillian Ross, Andrew W. Lo

Large language models are increasingly deployed as advisors in high-stakes domains -- answering medical questions, interpreting legal documents, recommending financial products -- where good advice requires integrating a user's full context rather than responding to salient surface features. We investigate whether frontier LLMs actually do this, or whether they instead exhibit heuristic collapse: a systematic reduction of complex, multi-factor decisions to a small number of dominant inputs. We study the phenomenon in investment advice, where legal standards explicitly require individualized reasoning over a client's full circumstances. Applying interpretable surrogate models to LLM outputs, we find systematic heuristic collapse: investment allocation decisions are largely determined by self-reported risk tolerance, while other relevant factors contribute minimally. We further find that web search partially attenuates heuristic collapse but does not resolve it. These findings suggest that heuristic collapse is not resolved by web search augmentation or model scale alone, and that deploying LLMs as advisors requires auditing input sensitivity, not just output quality.

Fengze Liu, Haoyu Wang, Joonhyuk Cho et al.

Clinical trials are critical for advancing medical treatments but remain prohibitively expensive and time-consuming. Accurate prediction of clinical trial outcomes can significantly reduce research and development costs and accelerate drug discovery. While recent deep learning models have shown promise by leveraging unstructured data, their black-box nature, lack of interpretability, and vulnerability to label leakage limit their practical use in high-stakes biomedical contexts. In this work, we propose AutoCT, a novel framework that combines the reasoning capabilities of large language models with the explainability of classical machine learning. AutoCT autonomously generates, evaluates, and refines tabular features based on public information without human input. Our method uses Monte Carlo Tree Search to iteratively optimize predictive performance. Experimental results show that AutoCT performs on par with or better than SOTA methods on clinical trial prediction tasks within only a limited number of self-refinement iterations, establishing a new paradigm for scalable, interpretable, and cost-efficient clinical trial prediction.