Atlanta Fed paper demonstrates signalling mechanism in mortgage market
Lenders in mortgage market able to reveal quality of loans by delaying trade
A working paper published by the Federal Reserve Bank of Atlanta aims to provide empirical evidence of a signalling mechanism through delay of trade in the mortgage market.
In their paper Are lemons sold first? Dynamic Signalling in the Mortgage Market, Manuel Adelino, Kristopher Gerardi and Barney Hartman-Glaser use data on mortgages securitised in the non-agency, private-label securitisation (PLS) market to show there is a "statistically significant" and "economically meaningful" positive
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