An Economic Choice Model for Micro-Loan Market

32 Pages Posted: 24 Nov 2015

See all articles by Duk Bin Jun

Duk Bin Jun

College of Business, Korea Advanced Institute of Science and Technology (KAIST)

Sung Wook Yoon

College of Business, Korea Advanced Institute of Science and Technology (KAIST)

Dong Soo Kim

Ohio State University (OSU) - Fisher College of Business

Date Written: November 1, 2015

Abstract

Investing in micro-loan market has become one of the most famous instrument in alternative finance due to the fact that its rate of return is comparable to other risky financial instruments and it places investors in the position of philanthropists and induce “enjoyment”. In terms of financial instrument, it differentiates with other financial goods that the amount of investment which an investor can invest is bounded by the goal set by borrower and minimum amount of investment decided by micro-loan intermediator. In In this paper, we propose a model to study the asset allocation behavior of individual investors when micro-loan market is being considered. Our model reflect the fact that the amount of investment is bounded and it incurs the discontinuity of demand. By reflecting motivations for participating in micro-loan market, our model can examine the impact of borrower’s characteristics and investment characteristics on “enjoyment” of investment in crowdfunding and on an individual investor’s investment allocations.

Keywords: Utility Theory, Bayesian Estimation, Micro-loan, Crowdfunding, Asset Allocation

Suggested Citation

Jun, Duk Bin and Yoon, Sung Wook and Kim, Dong Soo, An Economic Choice Model for Micro-Loan Market (November 1, 2015). KAIST College of Business Working Paper Series No. 2015-021, Available at SSRN: https://ssrn.com/abstract=2694353 or http://dx.doi.org/10.2139/ssrn.2694353

Duk Bin Jun (Contact Author)

College of Business, Korea Advanced Institute of Science and Technology (KAIST) ( email )

85 Hoegiro, Dongdaemoon-gu
Seoul 02455
Korea, Republic of (South Korea)

Sung Wook Yoon

College of Business, Korea Advanced Institute of Science and Technology (KAIST) ( email )

85 Hoegiro, Dongdaemoon-gu
Seoul 02455
Korea, Republic of (South Korea)

Dong Soo Kim

Ohio State University (OSU) - Fisher College of Business ( email )

558 Fisher Hall
2100 Neil Avenue
Columbus, OH 43210-1144
United States
614-313-4868 (Phone)

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