Information Identification And Behavior Bias Of Individual Investors

In recent years, experts and scholars from all over the worldpaid attention on P2 P online lending, and the industry grows explosive in our country. By the 1sthalf of 2014, the number of P2 P online lending platform in China has reached 714,and is expected by the end of 2014 the P2 P online lending industry’s annual cumulative volume is likely to be more than 300 billion yuan. P2 P online lending has become the important channels of borrowing in the Chinese folk finance.While the lack of perfect credit scoring system in our country makes the loan borrowers disclose their information may not be fully effective on the platform, which makes individual investors are prone to be the victims of such information asymmetry in a financial market.How should the individual investor identify information? How do they actually choose the way of identification? Whether the identification is completed? All these issues to be answered in the following article.Information is the key to modern financial system. However, research on how investor identify information is limited. In an efficient capital market, security price fully reflect the available information. Investors are able to acquire all the information simply based on the price whereas in the real world, where there is no such efficient market, adequate information will not be received due to the asymmetry between information releasers and receivers. Generally speaking,In this article, the individual investors’ capability of information filtering is investigated based to the analysis of Chinese P2 P online loan platform trade data. This data is from Renrendai.com, one of the biggest P2 P lending platform in China. The conclusions are:1.Most individual investors in Chinese P2 P online lending market are able to evaluate borrowers based on their limited personal information and loan information indicating that these investors have the capability of information identify, to some extent, are able to filter and to identify information to mitigate risks even in a serious asymmetry and disadvantaged information situation.2.In the previous issues, if the market exists investors with no experience or knowledge may weak our research conclusion. In this issue, we investigated whether individual investors may perform herding behavior to reduce the potential bias produced by investors with no financial knowledge or experience and we found that herding behavior is strongly evident on Chinese P2 P lending platform suggesting that individual investors are tend to make same decision based on others’ behavior despite other valuable information identify by themselves.3.In addition, we further analyzed individual investors’ investment preference to evaluate if the filtered information is fair and complete. Our findings reveal that individual investors are more likely to identify the information under the potent influence of borrowers’ location regardless of other valuable information, which indicates that objectiveness individual investors’ discrimination on borrowers’ location may come first before valuable information to be filtered among individual investors. This conclusion indicates that individual investor’s information identification is incomplete.The research provides a new view of how individual investors identify information based on the serious information asymmetry market. At the same time, supplement a certain theoretical and practical significance to the research of interest rate iberalization and behavior finance, etc.