Author Topic: Can more filtering improve upon LC's expected returns in the long run?  (Read 15002 times)

MoneyTree

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I just don't understand your concerns.
I think you're right about that--forgive the lack of clarity on my part--and it might help explain why I'm having a hard time understanding how your responses are relevant to my concerns.

If anybody else out there does understand my concerns, I would be most grateful to be disabused of what I hope is unwarranted pessimism about the long-term efficacy of filtering.

rawraw

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What is your current understanding of an efficient market?

berniemadeoff

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P2P lending is a far cry from an efficient market.  By filtering we are saying that we know more about what factors drive the default rates on these loans than LC does, which may or may not be true in the long run. I'm sure they have a bunch of smart guys with excel trying to make filtering useless - only time will tell.

MoneyTree

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P2P lending is a far cry from an efficient market.  By filtering we are saying that we know more about what factors drive the default rates on these loans than LC does, which may or may not be true in the long run. I'm sure they have a bunch of smart guys with excel trying to make filtering useless - only time will tell.

I regret ever having used the term "efficient market" in forming my question, as it seems to have led mostly to distracting tangents, rather than helpful discussion of what I thought was a simple question. berniemadeoff, your post is a rare exception. Thank you for clearly restating my concern. Based on the posts to this thread, I'm quite surprised at how many of us apparently do not assume that "they have a bunch of smart guys with excel trying to make filtering useless", or assume that the "smart guys" will never succeed.

brycemason

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I thought my post was useful. It's an incentives argument that points out why there will always be some (possibly many) loans to avoid on the platform. The "buckets" point for interest rates is also useful; even in the long run if all one can eek out is 0.5%, I'll take it.