TY - JOUR
T1 - Automatic versus manual investing
T2 - Role of past performance
AU - Kaawach, Said
AU - Kowalewski, Oskar
AU - Talavera, Oleksandr
N1 - Funding Information:
\u2606 We are grateful to the editor Iftekhar Hasan, two anonymous referees, and participants of the 2022 Economics of Financial Technology Conference, the 2022 Scottish Economic Society Conference, the 2021 Royal Economic Society Conference, and the 2021 Econometric Research in Finance Workshop for their valuable comments.
Publisher Copyright:
© 2024 The Authors
PY - 2024/10/1
Y1 - 2024/10/1
N2 - Using unique data from a leading peer-to-peer (P2P) lending platform, we investigate the link between past investment performance and choice of auto-investing tool. Our results suggest that investors who experience fewer defaults in the manual mode are more inclined to switch to automatic investment. Several factors account for this relationship, including investor inattention, decision speed, investment delegation, and experience. Regarding the latter, our results suggest that experienced investors are more likely to continue self-directed bidding, even if they have faced defaults in manual investments in the past. These investors may attribute their previous mistakes to their own actions rather than the limitations of the self-directed bids. Our results are robust to alternative specifications.
AB - Using unique data from a leading peer-to-peer (P2P) lending platform, we investigate the link between past investment performance and choice of auto-investing tool. Our results suggest that investors who experience fewer defaults in the manual mode are more inclined to switch to automatic investment. Several factors account for this relationship, including investor inattention, decision speed, investment delegation, and experience. Regarding the latter, our results suggest that experienced investors are more likely to continue self-directed bidding, even if they have faced defaults in manual investments in the past. These investors may attribute their previous mistakes to their own actions rather than the limitations of the self-directed bids. Our results are robust to alternative specifications.
KW - FinTech
KW - Peer-to-Peer Lending
KW - Investor Switching
KW - Automatic Bidding
UR - http://www.scopus.com/inward/record.url?scp=85201644470&partnerID=8YFLogxK
U2 - 10.1016/j.jfs.2024.101319
DO - 10.1016/j.jfs.2024.101319
M3 - Article
VL - 74
JO - Journal of Financial Stability
JF - Journal of Financial Stability
SN - 1572-3089
M1 - 101319
ER -