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Decision time and investors' portfolio strategies

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  • Zhang, Jing
  • Zhang, Wei
  • Li, Yuelei
  • Caglayan, Mustafa

Abstract

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.

Suggested Citation

  • Zhang, Jing & Zhang, Wei & Li, Yuelei & Caglayan, Mustafa, 2021. "Decision time and investors' portfolio strategies," Pacific-Basin Finance Journal, Elsevier, vol. 68(C).
    • Handle: RePEc:eee:pacfin:v:68:y:2021:i:c:s0927538x19305360
    DOI: 10.1016/j.pacfin.2020.101344
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    1. Said Kaawach & Oskar Kowalewski & Oleksandr Talavera, 2023. "Automatic vs Manual Investing: Role of Past Performance," Discussion Papers 23-04, Department of Economics, University of Birmingham.

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