Automatic versus manual investing: Role of past performance

Using unique data from a leading peer-to-peer (P2P) lending platform, we investigate the link between past investment performance and choice of auto-investing tool. Our results suggest that investors who experience fewer defaults in the manual mode are more inclined to switch to automatic investment. Several factors account for this relationship, including investor inattention, decision speed, investment delegation, and experience. Regarding the latter, our results suggest that experienced investors are more likely to continue self-directed bidding, even if they have faced defaults in manual investments in the past. These investors may attribute their previous mistakes to their own actions rather than the limitations of the self-directed bids. Our results are robust to alternative specifications.