### Author Topic: Was 2012 a particularly bad year for Prosper notes?  (Read 7203 times)

#### rawraw

• Hero Member
• Posts: 2795
##### Re: Re: Was 2012 a particularly bad year for Prosper notes?
« Reply #15 on: August 20, 2014, 03:20:38 PM »
OK, I understand difference in our interpretation. You assume average of outstanding principal to be the average of outstanding principal of all loans at one point in time (cross-sectional). I assume average of outstanding principal to be the average of outstanding principal across different point in time in the life of a loan (longitudinal).

Using your definition, we will need to know interest received and starting and ending outstanding principal every period to be able to calculate yield. Most of the time we don't have that much granularity in data provided.

My definition makes assumptions of interest received spread out over the age of the loan when payments were made. A simplification that makes estimation easier in light of lack of each period data with slight loss in estimation accuracy.

Average outstanding principal = sum of outstanding principal from period 0 through n / number of periods.

This is where the discrepancy lies.

My definition of outstanding_principal is simply the original_principal minus paid_principal.  Yes, originally outstanding_principal = original_principal; and when the loan is paid-off the outstanding_principal will be zero.  This the same concept when we derive the amortization schedule.  Average outstanding_principal, therefore, would simply be average of outstanding_principal of relevant loans at a given time.
You are much better with large data sets than myself, but Aare you certain you are pulling in the data correctly ? That result just doesn't make sense
Average outstanding principal = sum of outstanding principal from period 0 through n / number of periods.

This is where the discrepancy lies.

My definition of outstanding_principal is simply the original_principal minus paid_principal.  Yes, originally outstanding_principal = original_principal; and when the loan is paid-off the outstanding_principal will be zero.  This the same concept when we derive the amortization schedule.  Average outstanding_principal, therefore, would simply be average of outstanding_principal of relevant loans at a given time.

#### Thatguybil

• Newbie
• Posts: 39
##### Re: Was 2012 a particularly bad year for Prosper notes?
« Reply #16 on: August 20, 2014, 10:02:17 PM »
I am no investment expert but "actual yield" being negative for every year that we have season loans is shocking.

I have been investing in this since 2008 and have NOT had a negative return.

I understand yield is different from return, but how could an asset class exist and grow if the average yield was negative?