Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/307266 
Year of Publication: 
2022
Citation: 
[Journal:] Review of Managerial Science [ISSN:] 1863-6691 [Volume:] 17 [Issue:] 3 [Publisher:] Springer [Place:] Berlin, Heidelberg [Year:] 2022 [Pages:] 1037-1073
Publisher: 
Springer, Berlin, Heidelberg
Abstract: 
We examine investor behavior on a leading peer-to-business lending platform and identify an investment mistake that we refer to as default shock bias. First, we find that investors stop investing in new loans and cease diversifying their portfolio after experiencing a loan default. The default shock significantly worsens the risk–return profile of investors' loan portfolios. The defaults investors experience are often not beyond what would have been expected from the information that was provided by the platform ex ante. Second, investment experience on the platform is related to better investment decisions in general, but it does not reduce the default shock bias. These findings have important implications not only for the behavioral finance literature but also more generally for new forms of Internet-based finance.
Subjects: 
Behavioral finance
Investment bias
Peer-to-business lending
Crowdlending
Risk-adjusted return on capital
Diversification
JEL: 
G21
G23
L31
M14
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.