The Intelligent Investor: Not-Fully-Marketized Interest Rate and Risk Identify——Evidence from P2P Lending
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| Title | The Intelligent Investor: Not-Fully-Marketized Interest Rate and Risk Identify——Evidence from P2P Lending
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| Author | Liao Li,Li Mengran and Wang Zhengwei |
| Organization | Tsinghua University |
| Email | liaol@pbcsf.tsinghua.edu.cn;limr.10@sem.tsinghua.edu.cn;wangzhw@pbcsf.tsinghua.edu.cn |
| Key Words | Not-fully-marketized interest rate; Default risk; Risk identify; P2P lending |
| Abstract | Interest rate marketization is a very important step in China's financial reform. However there is little research on exploring the market foundation of interest rate marketization from a micro-data perspective. Using data from a peer-to-peer lending website, this paper finds that the not-fully-marketized interest rate only can predict a small proportion of borrower's default risk. Furthermore, the paper finds that investors are intelligent enough to identify these different default risks indicated by the same interest rate, via evaluating borrowers' public information. This paper also finds that the risk identify ability is directly reflected in numbers of participants in completed biddings, and indirectly reflected in time required to raise these biddings. The results suggest investors in China's credit market have the basic ability in risk identifying, which can form the market basis of China's interest rate marketization. |
| Serial Number | WP589 |
| Time | 2014-01-28 |
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