Over the next week, we’ll be taking a look at certain metrics of ‘note popularity’ and their correlation (or lack thereof) to default rates.
In 2010, there were a total of 11,536 notes issued. Of these notes, there were 847 defaults which means that for all notes issued in 2010, the default rate currently stands at 7.3%.
The basic question to be examined is as follows: Are there any metrics of popularity that correlate in any way to default rates? Can a Lending club investment strategy take any of these factors into account? The first metric we’ll be checking here at P2PAnalytics.com is Average Dollars per investor. LendingClub currently does not include “Number of Investors” in LoanStats.csv so this data had to be collected by crawling each loan individually with an algorithm and parsing the data. Here is a table showing the basics for 2010:
As you can see, there is no appreciable difference in average dollars per investor when comparing defaulted notes to all notes. Here are some more statistics:
When all notes issued in 2010 are taken together as a whole, the “top” 10% of dollars per investor include all notes with an average dollars invested per investor of over 110$. The “bottom” 10% include all notes with an average dollars per investor of less than 45$. The default rate on the top 10% of notes (>110$ per investor) is 8.0%. The default rate on the bottom 10% of notes (<45$ per investor) is 8.4%. Again, no appreciable pattern there. It seems as if dollars per investor cannot be taken into account when developing a Lending Club investment strategy.
P.S. Thanks to Peter Renton at Sociallending.net for providing some suggestions in terms of improving the site.