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Do Crowds Have Wisdom?——Evidence from P2P lending
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TitleDo Crowds Have Wisdom?——Evidence from P2P lending  
AuthorWang Zhengwei,Xiang Jia and Liao Li  
OrganizationPBC School of Finance, Tsinghua University 
Key WordsWisdom of Crowd; Herding; P2P Lending 
AbstractThe 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 NumberWP1001 
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