Herding behaviour in P2P lending markets

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Title: Herding behaviour in P2P lending markets
ISBN: 978-952-323-304-1
Author: Caglayan, Mustafa ; Talavera, Oleksandr ; Zhang, Wei
Organization: Bank of Finland
Department / Unit: Institute for Economies in Transition (BOFIT)
Series: BOFIT Discussion Papers
ISSN: 1456-5889
Series year: 2019
Series number: 22/2019
Year of publication: 2019
Publication date: 14.11.2019
Pages: 34
Subject (yso): sijoittajat; käyttäytyminen; rahoitus; luotot; luotonanto
Keywords: Bofit-kokoelma; laumakäyttäytyminen; Kiina
JEL: G21; G40; G41
Other keywords: FinTech; peer-to-peer; crowdlending; herding
Abstract: We explore individual lender behaviour on Renrendai.com, a leading Chinese peer-to-peer (P2P) crowdlending platform. Using a sample of roughly 5 million investor-loan-hour observations and applying a high-dimension fixed effect estimator, we establish evidence of herding behaviour: the investors in our sample tend to prefer assets that had attracted strong interest in previous periods. The herding behaviour relates to both the experience of the investor and the length of time of each investment session. The results show that herding happens mostly in the first or final hour of long sessions. Herding behaviour is further confirmed by estimates at the listing-hour data.
Table of contents: Abstract .. 4 1 Introduction .. 5 2 The P2P loan market in China and Renrendai.com .. 7 3 Empirical strategy .. 9 3.1 Data description .. 9 3.2 Econometric modelling .. 11 4 Results .. 13 4.1 Do individual investors herd? .. 13 4.2 The role of total logged session time on the platform .. 14 4.3 The role of experience on the platform .. 14 4.4 Session length and investor behavior .. 15 4.5 Experience and the first-hour effect .. 16 4.6 Is there herding behaviour at the listing level? .. 17 5 Conclusion .. 19 References .. 21 Figure and tables .. 23 Appendix .. 33
Rights: https://helda.helsinki.fi/bof/copyright

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