Automatic versus manual investing: Role of past performance

Said Kaawach, Oskar Kowalewski () and Oleksandr Talavera ()

Journal of Financial Stability, 2024, vol. 74, issue C

Abstract: 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.

Keywords: FinTech; Peer-to-Peer Lending; Investor Switching; Automatic Bidding (search for similar items in EconPapers)
JEL-codes: D90 G11 G40 G51 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:74:y:2024:i:c:s1572308924001049

DOI: 10.1016/j.jfs.2024.101319

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