Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/180354
Authors: 
Dorfleitner, Gregor
Hornuf, Lars
Weber, Martina
Year of Publication: 
2018
Series/Report no.: 
CESifo Working Paper No. 7092
Abstract: 
We study the investor behavior on a leading peer-to-business lending platform and find evidence of two new investment biases—a default shock bias and a deep market bias. First, we find investors to stop investing in new loans and to cease from diversifying their portfolio after experiencing a loan default. This default shock significantly worsens the risk-return profile of investors’ loan portfolios. Second, investors are unable to cope with a glut of loan campaigns. Similar to the default shock bias, investors cease from investing in new loans and consequently underdiversify their portfolios as more loans become available on the platform. Deeper markets also result in a deterioration of investors’ risk-return profiles. Third, investment experience on the platform reduces the effect of the deep market bias.
Subjects: 
behavioral finance
investment bias
peer-to-business lending
crowdlending
RAROC
diversification
JEL: 
G11
G40
Document Type: 
Working Paper

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