Experts vs. Non-Experts in Online Crowdfunding Markets


Publication History

Received: December 24, 2020
Revised: September 15, 2021; March 22, 2022; June 8, 2022
Accepted: June 14, 2022
Published Online as Articles in Advance: Forthcoming
Published Online in Issue: Forthcoming


The growth of crowdfunding markets that include both expert and non-expert investors will soon accelerate due to recent changes in Securities Exchange Commission (SEC) regulations. Work suggests that non-experts (1) may benefit from experts’ participation via mimicking their trades, but (2) will also face a cost as experts crowding non-experts out of the best opportunities ensures that non-experts will suffer lower returns than experts. Traditional economic theory holds that the crowding effect means the relative importance of non-experts in the market will decline over time until they become unimportant. Exploiting a unique period in one crowdfunding market ( that allows us to directly estimate the net cost of competing with better informed experts, we find that the net negative effects of expert participation on non-experts are small. We use simulations to both better understand (1) the market characteristics and crowdfunding platform choices that influence experts’ and non-experts’ returns, their return gap, and the extent to which non-experts are better or worse off relative to a market without expert participation, and (2) the factors that may contribute to the small expert/non-expert Prosper return gap.

Additional Details
Author Mingfeng Lin, Richard W. Sias, and Zaiyan Wei
Volume Forthcoming
Issue Forthcoming
Keywords FinTech, Crowdfunding, Experts, Non-experts
Page Numbers
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