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Does irrational lead to higher returns? Evidence from the Chinese P2P lending market

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  • Zhao, Yingxiu
  • Zhang, Wei
  • Li, Yuelei
  • Xiong, Xiong

Abstract

In this article, we study the relationship between investors’ rationality and their returns in the P2P lending market through a bounded rationality decision-making framework. Our model shows that low-bounded rationality (i.e., highly rational) investors earn higher returns than their high-bounded rationality counterparts. This relation is supported by our empirical tests using the Chinese P2P lending market data.

Suggested Citation

  • Zhao, Yingxiu & Zhang, Wei & Li, Yuelei & Xiong, Xiong, 2021. "Does irrational lead to higher returns? Evidence from the Chinese P2P lending market," Finance Research Letters, Elsevier, vol. 39(C).
    • Handle: RePEc:eee:finlet:v:39:y:2021:i:c:s1544612319313479
    DOI: 10.1016/j.frl.2020.101608
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    Cited by:

    1. Yingxiu Zhao & Sitong Zhou, 2023. "The Impact of Two-Sided Market Platforms on Participants’ Trading Strategies: An Evolutionary Game Analysis," Mathematics, MDPI, vol. 11(8), pages 1-18, April.

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    Keywords

    Bounded rationality; P2P lending; Return; Reference point;
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