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91: Behavioral Finance in P2P Lending with Laura Gonzalez

By Sam Marks / Johnny FD

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.   Where we are: Sam - Florida Johnny - Nepal   References:   Discussed: ILAB 13 - PeerStreet vs. Lending Club ILAB 45 – Behavioral Finance and How Betterment is Optimizing Around It   Time Stamps: 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   If you enjoyed this episode, do us a favor and share it! Also if you haven’t already, please take a minute to leave us a 5-star review on iTunes and claim your bonus here! Copyright 2017. All rights reserved. Read our disclaimer here.

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