Contagious Adverse Selection

• 成果类型: Article
• 署名作者: Morris, Stephen; Shin, Hyun Song
• 署名单位: Princeton University
• 刊物名称: AMERICAN ECONOMIC JOURNAL-MACROECONOMICS
• ISSN/ISSBN: 1945-7707
• DOI: 10.1257/mac.4.1.1
• 发表日期: 2012
• 页码: 1-21
• 关键词: market; liquidity; equilibrium; RECOGNITION; disclosure

摘要

We illustrate the corrosive effect of even small amounts of adverse selection in an asset market and show how it can lead to the total breakdown of trade. The problem is the failure of market confidence, defined as approximate common knowledge of an upper bound on expected losses. Small probability events can unravel market confidence. We discuss the role of contagious adverse selection and the problem of toxic assets in the recent financial crisis.