Wall Street and the Housing Bubble

Ing-Haw Cheng, Sahil Raina, Wei Xiong

NBER Working Paper No. 18904
Issued in March 2013
NBER Program(s):Asset Pricing, Corporate Finance, Monetary Economics

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.

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Document Object Identifier (DOI): 10.3386/w18904

Published: Ing-Haw Cheng & Sahil Raina & Wei Xiong, 2014. "Wall Street and the Housing Bubble," American Economic Review, American Economic Association, vol. 104(9), pages 2797-2829, September. citation courtesy of