Wall Street and the Housing Bubble

42 Pages Posted: 22 Mar 2013 Last revised: 8 May 2015

See all articles by Ing-Haw Cheng

Ing-Haw Cheng

Dartmouth College - Tuck School of Business

Sahil Raina

Alberta School of Business, University of Alberta

Wei Xiong

Princeton University - Department of Economics; National Bureau of Economic Research (NBER)

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Date Written: 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.

Suggested Citation

Cheng, Ing-Haw and Raina, Sahil and Xiong, Wei, Wall Street and the Housing Bubble (March 2013). NBER Working Paper No. w18904, Available at SSRN: https://ssrn.com/abstract=2237817

Ing-Haw Cheng (Contact Author)

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

Sahil Raina

Alberta School of Business, University of Alberta ( email )

2-32B Business Building
Edmonton, Alberta T6G 2R6
Canada

HOME PAGE: http://sites.ualberta.ca/~sraina/

Wei Xiong

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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