Research Of Herd Behavior In Chinese P2P Lending Market

Since, the China's first peer-to-peer lending platform Paipaidai established in 2007,the Chinese peer-to-peer lending market has went into the stage of vigorous development. In detail, the amount of national peer-to-peer lending deals in 2005 reached 982 billion Yuan, eased the problem of financing of low-income earners and self-employed owners in certain extent. The whole dealing process of peer-to-peer lending are completed on the Internet, thus the lenders and debtors are not acquainted with each other, and the features of hidden and trans-space exits in the Internet, thus the investors of peer-to-peer lending platforms are difficult to grasp the real information of borrowers. In this background, in order to reduce the investment risks better, the investment decisions of other investors could be important information for investors when they need to make investment judgment, which would provide for the existence of the possibility of herd behavior theory. Given the data availability of P2P lending platform, this paper aims to explore the investor behavior characteristics of P2P lending market on the basis of relevant literature by using "renrendai" platform data, to verify empirically if there is herd behavior in Chinese P2P lending market. Firstly, this article describes the P2P lending market background of the establishment and its significance; secondly, we reviews the relevant literatures, indicates research subject of this paper, and the definition of herd behavior, causes and impacts on the financial market; then, we establish panel data regression model, using " subsequent bidding method " to explore the correlation between the amount of t-1 cumulative of investment projects and obtained investment amount at t. We find that investors herd behavior exists in Chinese P2P lending market, and this conclusion passes the robustness test; and finally, we utilizethe results obtained in this paper to present some policy recommendations from several aspectsand future research are discussed.