News Detailansicht

New Publication in Review of Managerial Science

Professor Dr. Lars Hornuf has published a new article in the Review of Managerial Science under the title " Paralyzed by Shock: The Portfolio Formation Behavior of Peer-to-Business Lending Investors " The article emerged in collaboration with Prof. Dr. Gregor Dorfleitner and Dr. Martina Weber.

The authors examine investor behavior on a leading peer-to-business lending platform and identify an investment mistake that they refer to as default shock bias. First, they find that investors stop investing in new loans and cease diversifying their portfolio after experiencing a loan default. The default shock significantly worsens the risk–return profile of investors’ loan portfolios. The defaults investors experience are often not beyond what would have been expected from the information that was provided by the platform ex ante. Second, investment experience on the platform is related to better investment decisions in general, but it does not reduce the default shock bias. These findings have important implications not only for the behavioral finance literature but also more generally for new forms of Internet-based finance.

The full article can be downloaded here.