Dorfleitner, Gregor and Hornuf, Lars and Weber, Martina (2023) Paralyzed by shock: the portfolio formation behavior of peer-to-business lending investors. REVIEW OF MANAGERIAL SCIENCE, 17 (3). pp. 1037-1073. ISSN 1863-6683, 1863-6691
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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.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | INDIVIDUAL INVESTORS; CAPITAL ALLOCATION; SOPHISTICATION; DISPOSITION; EXPERIENCES; GENDER; CHOICE; LEARN; BIAS; Behavioral finance; Investment bias; Peer-to-business lending; Crowdlending; Risk-adjusted return on capital; Diversification |
| Subjects: | 300 Social sciences > 330 Economics |
| Divisions: | Business, Economics and Information Systems > Institut für Betriebswirtschaftslehre > Lehrstuhl für Finanzierung (Prof. Dr. Gregor Dorfleitner) |
| Depositing User: | Dr. Gernot Deinzer |
| Date Deposited: | 21 Feb 2024 05:41 |
| Last Modified: | 21 Feb 2024 05:41 |
| URI: | https://pred.uni-regensburg.de/id/eprint/57211 |
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