Are the kind of people who take out P2P loans the same kind of people who have a lot of excess money to invest in the stock market? How correlated would they be?
That depends. If you’re investing in small businesses, maybe a lot. People borrow money for various reasons, and have different risk profiles, and as the investor, you can pick and choose.
For example, a recent college graduate who just landed a high-paying job may get a P2P loan to consolidate credit card debt. How correlated do you expect that to be to the stock market?
Individuals are still affected by the broader economy (the guy could lose his job because of this), but we don’t need 0% correlation to benefit a portfolio, and you can cut off the extreme tail in the stock market using cheap index puts. The only way to answer this is with data.
Are the kind of people who take out P2P loans the same kind of people who have a lot of excess money to invest in the stock market? How correlated would they be?
That depends. If you’re investing in small businesses, maybe a lot. People borrow money for various reasons, and have different risk profiles, and as the investor, you can pick and choose.
For example, a recent college graduate who just landed a high-paying job may get a P2P loan to consolidate credit card debt. How correlated do you expect that to be to the stock market?
Individuals are still affected by the broader economy (the guy could lose his job because of this), but we don’t need 0% correlation to benefit a portfolio, and you can cut off the extreme tail in the stock market using cheap index puts. The only way to answer this is with data.