Decision time and investors' portfolio strategies

• Published in: Pacific-Basin finance journal 2021-09, Vol.68, p.101344, Article 101344
• Main Authors: Zhang, Jing, Zhang, Wei, Li, Yuelei, Caglayan, Mustafa
• Format: Article
• Language: English
• Subjects: Decision time; Investment decision; Peer-to-peer lending markets
• ISSN: 0927-538X; 1879-0585
• DOI: 10.1016/j.pacfin.2020.101344

This study empirically and experimentally investigates whether and how time-constraints influence investors' profits and portfolio strategies. Using data from the peer-to-peer (P2P) lending market, we find that profits increase as the relative decision-making time (RDT) increases at the investor and bid levels. The losses are because investors without enough time cannot analyse loans' default ratios to reduce their allocation of funds to high-risk loans. Our study suggests that fast decisions reduce the quality of the decisions and increase the risk of the investments and systems. This study fills research gaps about the influence of decision-making time on investment decisions in real financial markets. We also find that there is a threshold value in the positive relationship between investment decision time and profits. When the completion time of a funded loan is more than 10 s, improved investment returns can be observed as the RDT increases. •Investors' profits increase as relative decision-making time increases.•Investors without enough time only focus on loans' rates and cannot analyse loans' default risks to reduce the allocation of funds for high-risk loans.•When the completion time of loan funded is more than 10 s, the improvement of profits can be observed with the increase of relative decision time.