User Interface and Firsthand Experience in Retail Investing

Abstract

Using data from a major online peer-to-peer lending platform, we document that, due to time pressure, investors appear to focus on interest rates and only partially account for credit ratings in their decisions. The effect is stronger for mobile-based investors than for PC-based ones. Our evidence suggests that this variation is caused by the difference in information content on the interfaces rather than differences in the devices’ physical attributes per se. Investors improve their decisions by slowing down and paying more attention to credit ratings after experiencing a loan default firsthand, but not after observing others experiencing defaults.

Smart(Phone) Investing? A within Investor-Time Analysis of New Technologies and Trading Behavior

“…Collectively, this evidence suggests that the smaller screen size of smartphones does not drive our main results. Our findings are consistent with evidence in Liao et al (2020) that differences in the devices' physical attributes per se do not drive investor behavior in…”

Strategic co-funding in informal finance market: evidence from China

“…They should rely on all available information, including verified and unverifiable information, to screen borrowers (Michels, 2012). They also depend on the critical factors to invest with fast thinking under time pressure (Liao, Wang, Xiang, Yan, & Yang 2020). It still has a massive issue of information asymmetry on the anonymous lending market even in the Internet age.…”

“…As of September 2020, more than 1 million lenders and 4 million borrowers make a deal on Renrendai, and the total funded amount is 116 billion CNY. Renrendai timely and fairly discloses information, and it has been an important data source to study the Chinese online credit market (Chen, Huang, & Ye, 2020;Jiang, Liu, & Lu, 2020;Li, Deng, & Li, 2020;Liao, Wang, Xiang, Yan, & Yang, 2020;Wang, Zhao, & Shen, 2021;Xu, Hilliard, & Barth, 2020). Renrendai provides unsecured, on-site verified, and joint-liability credits.…”

“…The credit grade is highly related to the successful funding probability, and borrowers with lower credit grades are less likely to be funded in the online credit market (Han, Chen, Liu, Luo, & Fan, 2018). Renrendai issues seven credit ratings ranging from poor to excellent and updates each borrower's credit rating monthly based on the repayment status of her/his loans (Liao, Wang, Xiang, Yan, & Yang, 2020). One caveat is that the credit ratings we can observe come from a snapshot of the data retrieval date rather than the dynamic mapping with time.…”

“…Therefore the uninformed lenders will screen the borrowers by all available information, even the unverifiable information in the peer-to-peer lending platform (Michels, 2012). When time pressure is more substantial, lenders primarily rely on critical factors, such as interest rates, to invest with fast thinking (Liao, Wang, Xiang, Yan, & Yang, 2020). The formal and informal financial sectors can balance the advantages and disadvantages to each other (Madestam, 2014) and earn higher profits in the co-funding equilibriums (Andersen & Malchow-Møller, 2006).…”