Herding behaviour in P2P lending markets

Mustafa Caglayan; Oleksandr Talavera; Wei Zhang

doi:10.1016/j.jempfin.2021.05.005

Herding behaviour in P2P lending markets

Mustafa Caglayan, Oleksandr Talavera, Wei Zhang

Research output: Contribution to journal › Article › peer-review

24 Citations (Scopus)

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Abstract

We explore lender behaviour on Renrendai.com, a leading Chinese peer-to-peer (P2P) crowdlending platform. Using a sample of around five million investor-loan-hour observations, and applying a high- dimensional fixed effect estimator, we confirm evidence of herding behaviour: the investors in our sample prefer assets that had attracted strong interest in previous periods. The herding behaviour relates to both the experience level of the investor and the length of time of an investment session on the platform. We also provide evidence of significant herding behaviour in the first hour of experienced investors’sessions. Our results are robust to the use of alternative specifications.

Original language	English
Pages (from-to)	27-41
Number of pages	15
Journal	Journal of Empirical Finance
Volume	63
Early online date	2 Jun 2021
DOIs	https://doi.org/10.1016/j.jempfin.2021.05.005
Publication status	Published - Sept 2021

Keywords

Crowdlending
FinTech
Herding
Investor experience
Peer-to-peer

ASJC Scopus subject areas

Finance
Economics and Econometrics

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10.1016/j.jempfin.2021.05.005

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© 2021 Elsevier B.V.
Accepted author manuscript, 619 KBLicence: CC BY-NC-ND

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title = "Herding behaviour in P2P lending markets",

abstract = "We explore lender behaviour on Renrendai.com, a leading Chinese peer-to-peer (P2P) crowdlending platform. Using a sample of around five million investor-loan-hour observations, and applying a high- dimensional fixed effect estimator, we confirm evidence of herding behaviour: the investors in our sample prefer assets that had attracted strong interest in previous periods. The herding behaviour relates to both the experience level of the investor and the length of time of an investment session on the platform. We also provide evidence of significant herding behaviour in the first hour of experienced investors{\textquoteright}sessions. Our results are robust to the use of alternative specifications.",

keywords = "Crowdlending, FinTech, Herding, Investor experience, Peer-to-peer",

author = "Mustafa Caglayan and Oleksandr Talavera and Wei Zhang",

note = "Funding Information: This work has been supported by the Economic and Social Research Council (ESRC), UK grant ES/P004741/1 . We thank Haofeng Xu and Linh Vi for their excellent research assistance, as well as the seminar participants at the National Bank of Ukraine and University of Reading and conference participants at FMARC 2019 and ECOMOD 2019 for their insightful comments and suggestions. We are particularly grateful to seminar participants at BOFIT, Zuzana Fungacova for their valuable feedback. Special thanks to Gregory Moore and Chloe Mitchel for editing the paper. The standard disclaimer applies. Publisher Copyright: {\textcopyright} 2021 Elsevier B.V.",

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doi = "10.1016/j.jempfin.2021.05.005",

language = "English",

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AU - Caglayan, Mustafa

AU - Talavera, Oleksandr

AU - Zhang, Wei

N1 - Funding Information: This work has been supported by the Economic and Social Research Council (ESRC), UK grant ES/P004741/1 . We thank Haofeng Xu and Linh Vi for their excellent research assistance, as well as the seminar participants at the National Bank of Ukraine and University of Reading and conference participants at FMARC 2019 and ECOMOD 2019 for their insightful comments and suggestions. We are particularly grateful to seminar participants at BOFIT, Zuzana Fungacova for their valuable feedback. Special thanks to Gregory Moore and Chloe Mitchel for editing the paper. The standard disclaimer applies. Publisher Copyright: © 2021 Elsevier B.V.

PY - 2021/9

Y1 - 2021/9

N2 - We explore lender behaviour on Renrendai.com, a leading Chinese peer-to-peer (P2P) crowdlending platform. Using a sample of around five million investor-loan-hour observations, and applying a high- dimensional fixed effect estimator, we confirm evidence of herding behaviour: the investors in our sample prefer assets that had attracted strong interest in previous periods. The herding behaviour relates to both the experience level of the investor and the length of time of an investment session on the platform. We also provide evidence of significant herding behaviour in the first hour of experienced investors’sessions. Our results are robust to the use of alternative specifications.

AB - We explore lender behaviour on Renrendai.com, a leading Chinese peer-to-peer (P2P) crowdlending platform. Using a sample of around five million investor-loan-hour observations, and applying a high- dimensional fixed effect estimator, we confirm evidence of herding behaviour: the investors in our sample prefer assets that had attracted strong interest in previous periods. The herding behaviour relates to both the experience level of the investor and the length of time of an investment session on the platform. We also provide evidence of significant herding behaviour in the first hour of experienced investors’sessions. Our results are robust to the use of alternative specifications.

KW - Crowdlending

KW - FinTech

KW - Herding

KW - Investor experience

KW - Peer-to-peer

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DO - 10.1016/j.jempfin.2021.05.005

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VL - 63

SP - 27

EP - 41

JO - Journal of Empirical Finance

JF - Journal of Empirical Finance

ER -

Herding behaviour in P2P lending markets

Abstract

Keywords

ASJC Scopus subject areas

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