Wall Street and the Housing Bubble
American Economic Review
vol. 104,
no. 9, September 2014
(pp. 2797-2829)
Abstract
We analyze whether mid-level managers in securitized finance were aware of a large-scale housing bubble and a looming crisis in 2004-2006 using their personal home transaction data. We find that the average person in our sample neither timed the market nor were cautious in their home transactions, and did not exhibit awareness of problems in overall housing markets. 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.Citation
Cheng, Ing-Haw, Sahil Raina, and Wei Xiong. 2014. "Wall Street and the Housing Bubble." American Economic Review, 104 (9): 2797-2829. DOI: 10.1257/aer.104.9.2797Additional Materials
JEL Classification
- D14 Household Saving; Personal Finance
- D83 Search; Learning; Information and Knowledge; Communication; Belief
- E32 Business Fluctuations; Cycles
- E44 Financial Markets and the Macroeconomy
- G01 Financial Crises
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- R31 Housing Supply and Markets