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Asset mispricing in loan secondary markets

Mustafa Caglayan, Tho Pham, Oleksandr Talavera and Xiong Xiong
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Mustafa Caglayan: Heriot-Watt University
Xiong Xiong: Tianjin University

Discussion Papers from Department of Economics, University of Birmingham

Abstract: This study examines the presence of mispricing in Bondora, a leading European peer-to-peer lending platform, over the 2016-2019 period. Implementing machine-learning methods, we calculate the likelihood of success for loan resale in Bondora secondary market and compare with ex-post outcomes. We find evidence of mispricing mainly driven by the differences in market participants' perceptions about asset values: low-quality assets are successfully sold while high-quality assets are not. Once sellers discover buyers' beliefs about asset prices, they revalue their assets according to buyers' perception to exploit this mismatch in subsequent listings. Our results are robust to various statistical and machine learning methods.

Keywords: mispricing; online secondary market; peer-to-peer lending; belief dispersion (search for similar items in EconPapers)
JEL-codes: G12 G20 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-big and nep-cmp
Date: 2019-07
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Handle: RePEc:bir:birmec:19-07