Zhengwei Wang

Government Affiliation and Fintech Industry: The Peer-to-Peer Lending Platforms in China

With thousands of co-existing and competing platforms, the Chinese peer-to-peer (P2P) lending market experienced both high growth and high failure rate. We hand collect unique data for these P2P platforms and investigate the differences in performance and survival for platforms with and without affiliations with state-owned enterprises (SOEs). P2P platforms with SOE affiliations have higher trading volumes, attract more investors, and offer lower interest rates. These platforms also have significantly better survivability than those without the SOE affiliations, especially during market downturns. These results can be helpful to investors and regulators, especially those from other emerging markets.

Investing with Fast Thinking

Using data from a major online peer-to-peer lending platform, we document that, due to time pressure, investors appear to focus on interest rates and only partially account for credit ratings in their decisions. The effect is stronger for mobile-based investors than for PC-based ones. Our evidence suggests that this variation is caused by the difference in information content on the interfaces rather than differences in the devices’ physical attributes per se. Investors improve their decisions by slowing down and paying more attention to credit ratings after experiencing a loan default firsthand, but not after observing others experiencing defaults.

Characteristics-Based Factors

Recent studies have proposed a large set of powerful characteristics-based factors in the stock market. This study examines the pricing of these factors using portfolios that are formed by directly sorting stocks based on their exposure to these factors. These beta-sorted portfolios have very large ex post factor beta spreads. However, the return spreads between high- and low-beta firms are typically tiny and insignificant (on average, 0.01% per month). More important, we show that the differences between factor-adjusted returns and characteristics-adjusted returns for these beta-sorted portfolios are both economically and statistically significant at about 0.41% per month. In addition, factor-adjusted returns and characteristics-adjusted returns can be significantly different for a large number of anomalies and mutual funds. Our results thus urge cautions regarding the common practice of using factor models such as adjusting for investment style, performance evaluation, and performance attribution.

Thinking Fast, Not Slow: Evidence from Peer-to-Peer Lending

Investment opportunities in the online peer to peer (P2P) lending market often disappear in a few minutes. It provides an ideal laboratory for testing the hypothesis that people are liable to make mistakes under fast-thinking (Kahneman 2011). Using one of the leading P2P lending platforms in China, Renrendai, we show that investors tend to pay too much attention to high interest rates and too little attention to high default risks under fast-thinking. Such biases in decision making result in higher default rates and poorer returns than expected. We further show that investors learn over time to convert from System 1 to System 2 thinking.Investment opportunities in the online peer to peer (P2P) lending market often disappear in a few minutes. It provides an ideal laboratory for testing the hypothesis that people are liable to make mistakes under fast-thinking (Kahneman 2011). Using one of the leading P2P lending platforms in China, Renrendai, we show that investors tend to pay too much attention to high interest rates and too little attention to high default risks under fast-thinking. Such biases in decision making result in higher default rates and poorer returns than expected. We further show that investors learn over time to convert from System 1 to System 2 thinking.

Childhood Exposure and Stock Market Participation

This research studies the childhood exposure effect on stock market participation. We find that individuals with rural childhoods are less likely to invest in the stock market, controlling for wealth, trust, social interaction, risk attitude, and financial literacy. Furthermore, we find evidence that the trait of openness mitigates the enduring effect of rural childhood exposure, which is consistent with a cultural explanation.

Are the regulations on seasoned equity offerings effective

This paper compares the cumulative abnormal returns and operating performance of Chinese listed firms which made seasoned equity offerings or right issues at different profitability thresholds. Results show that both the average long-term and short-term cumulative abnormal returns of these firms increase significantly after the setting of thresholds. Moreover, the accounting performances of these firms are also improved to some degree. It implies that regulations on new equity raising behavior of listed firms are necessary and effective in protecting the investors and restricting listed firms’s “money encirclement” behaviors.摘要在不同的配股和增发门槛下, 分析进行配股和增发的公司累积超额回报率和会计经营业绩表现。 研究发现, 再融资公司股票的平均累积超额收益率与没有门槛时相比, 无论长期还是短期都有显著提高, 会计业绩也有所改善。 在我国股票市场处于新兴和转轨阶段, 为保护投资者利益, 抑制 “圈钱” 行为, 实现股票市场 “发展、 规范和市场承受能力高度统一”, 以往的再融资门槛是必要和有效的。 随着近年来合格投资者力量增强, 可以考虑降低融资的财务指标门槛, 放松发行规模和时机选择的限制。