Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/172905
Authors: 
Adelino, Manuel
Gerardi, Kristopher
Hartman-Glaser, Barney
Year of Publication: 
2016
Series/Report no.: 
Working Paper No. 2016-8
Abstract: 
A central result in the theory of adverse selection in asset markets is that informed sellers can signal quality by delaying trade. This paper uses the residential mortgage market as a laboratory to test this mechanism. Using detailed, loan-level data on privately securitized mortgages, we find a strong relation between mortgage performance and time-to-sale. Importantly, this finding is conditional on all observable information about the loans. This effect is strongest in the "Alt-A" segment of the market, where loans are often originated with incomplete documentation. The results provide some of the first evidence of a signaling mechanism through delay of trade.
Subjects: 
securitization
mortgage default
adverse selection
signaling
asymmetric information
JEL: 
G17
G21
G23
Document Type: 
Working Paper

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