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Economic Update: Wall Street and the Housing Bubble

Posted by nexvucapital on March 30, 2013

We present an interesting paper on the personal actions of those on Wall Street during the Housing Bubble:

Wall Street and the Housing Bubble

Ing-Haw Cheng, Sahil Raina and Wei Xiong
March 2013 – Abstract

“We analyze whether mid-level managers in securitized finance were aware of
the housing bubble and a looming crisis in 2004-2006 using their personal
home transaction data. To the extent that the practice of securitization may have
led to lax screening of subprime borrowers, we find that the average person in
our sample did not expect it to lead to problems in the wider housing market.
Certain groups of securitization agents were particularly aggressive in
increasing their exposure to housing during this period, suggesting the need to
expand the incentives-based view of the crisis to incorporate a role for beliefs.”

http://www.princeton.edu/~wxiong/papers/WallStreet.pdf

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