Crazy gamblers or cautious investors? Evidence from a peer‐to‐peer market in China

By data of 10,357 individual investors from Renrendai.com, an established peer‐to‐peer (P2P) lending platform in China over the period of 2011–2014, we examine whether investors’ prior investment outcomes influence their subsequent risk‐taking behavior in the credit market. We find strong evidence that a prior trading loss induces greater subsequent risk‐taking. Specifically, investors decrease their number of bids and the bidding amount; and choose listings with a lower interest rate and higher credit grade. The investors who obtain more prior gains become more cautious and take on less posterior risk. Overall, this study complements the lack of relevant research in the credit market.