Do Crowds Have Wisdom?——Evidence from P2P lending
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| Title | Do Crowds Have Wisdom?——Evidence from P2P lending
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| Author | Wang Zhengwei，Xiang Jia and Liao Li |
| Organization | PBC School of Finance, Tsinghua University |
| Email | |
| Key Words | Wisdom of Crowd; Herding; P2P Lending |
| Abstract | The de-professionalized trend in Internet financial investment highlights the significance of crowd views, and the wisdom of crowd is increasingly attracting researchers’ attention. This study aims to explore the predictive power of crowd views towards default rate by analyzing the evidence from P2P lending. We employed the transaction data from a P2P lending platform in China and constructed the herding measure index for data analysis. We found that the default rate of loan decreases as the herding of investors boosts under the control of all the other characteristics of loans. Further, regarding two loans with similar characteristics, the loan with the herding effect is significantly less likely to default compared with the loan without the herding effect. Herding, therefore, is informative in judging the probability of default. We conclude that the crowd has wisdom in P2P investment and the wisdom of crowd offers new information to this investment. |
| Serial Number | WP1001 |
| Time | 2015-12-22 |
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