A Study of Herd Behavior and Its Rationality In China's Online Peer-to-Peer Lending Market

Abstract

Abstract:

We aim to investigate the rationality of private lending in China's online market with data collected from a leading online peer-to-peer lending platform in China. We find that the amount of bidding for a borrowing listing at the current period is significantly and positively associated with total bidding amount at the end of the previous period, implying that herding behaviors exist among lenders at the P2P lending market in China. However, some of the attributes of borrowing listings don't negatively moderate the relationship between the bidding amount at the end of the previous period and the bidding amount for the current amount, and there are no significant negative relationship between herding momentum and loan performance, indicating that the herding behavior is not dominated by rationality and could not get access to "crowd wisdom". The findings of the research provide valuable insights for policy makers and lending platforms.

Key words: online peer-to-peer lending (P2P lending), herding, rationality

Chen Dongyu, Zheng Haichao. A Study of Herd Behavior and Its Rationality In China's Online Peer-to-Peer Lending Market[J]. , 2017, 29(1): 3-11.

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