“Do not look too much on the photo and pay more attention to data.”
Laura Gonzalez is an Associate Professor in Finance at California State University with over 10 years of experience in teaching finance courses. One of the studies she took interest in is behavioral finance in peer to peer (P2P) lending which they conducted an experiment on it.
During the episode, Laura reveals the major biases of lenders in terms of approving loans apart from their credit information. She explains the theory of beauty premium which significantly influence the decision of lenders. She also explains how they conducted the experiment to test this theory and what considerable indications were acquired.
Listen to ILAB 91 on iTunes here or subscribe on your favorite podcast app.
ILAB 91 Show Notes
Where we are:
Johnny – Nepal
Sam – Florida
Fundrise – start with only $1,000 into their REIT funds (non-accredited investors OK)
PeerStreet – get a 1% yield bump on your first loan
ArtofFX – start with just a $10,000 account (reduced from $25,000)
Wealthfront – get your first $15,000 managed free
RealtyShares – try it free
ILAB 13 – PeerStreet vs. Lending Club
ILAB 45 – Behavioral Finance and How Betterment is Optimizing Around It
05:31 – Laura’s background
07:07 – History of P2P lending
11:40 – Growth of the P2P market
13:09 – P2P platforms
16:08 – Major biases in approval of loans
19:22 – Beauty Premium
24:01 – The conduct of the experiment
25:02 – Findings and indications
30:00 – Outcome based on biases
32:39 – What to consider when lending someone
34:49 – Information available on Prosper
37:02 – Repayment success rate in various countries
39:23 – Prosper vs. Lending Club
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