Thursday, December 13, 2007

Prosper's November Market Summary

On Tuesday, Prosper released their November market summary reporting on their marketplace statistics for the month of November. This followed the usual format, and this time there's a few things I want to call out. First, the estimated annual return for the Prosper Select Index seems to be collapsing. Comparing the November statistics against the October numbers reveals a notable drop in estimated return.

I'm attributing the large drop in the sub-prime space to the previous market summaries highlighting that there were better returns there. People bid hard on those loans in the Prosper Select Index and that drove down the ROI, but it's hard to directly infer that since Prosper didn't publish their Prosper Select return estimation methodology in the press release.

I also want to note that, despite Fed interest rates still dropping, the average Prosper Select loan rate increased in the Prime and Sub-prime spaces (0.72% and 2.00% respectively). After last month's commentary, I was preparing to argue against this conclusion with a statistical furor rarely seen outside of an accounting class, but I think I'll let this do all the talking for now. I hope Chris noticed this contra-indicator and that we can avoid further inferences of statistical correlation between the Fed funds rate and Prosper's average lender rate.

In addition, this month's commentary was written by Kirk Inglis, Prosper's CFO. It was good to get a different flavor. Kirk highlighted the bidding guidance tool and second loans to borrowers. I suspect Chris' commentary equivalent went into the Prosper blog's opening post.

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