The 2007–2008 financial crisis: Is there evidence of disaster myopia?

Camille Cornand and Céline Gimet

Emerging Markets Review, 2012, vol. 13, issue 3, 301-315

Abstract: The disaster myopia hypothesis is a theoretical argument that may explain why crises are recurrent events. Under very optimistic circumstances, investors disregard any relevant information concerning the increasing degree of risk. This risky behavior may contribute to the formation of a bubble that bursts into a crisis. This paper shows that the 2007 financial crisis exhibits disaster myopia in the banking sector. Moreover, it identifies macro and specific determinant variables in banks' risk taking since the beginning of the years 2000.

Keywords: Banks; Disaster myopia; Financial crisis; GMM; Risk taking dynamics (search for similar items in EconPapers)
JEL-codes: C23 G01 G21 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1566014112000088
Full text for ScienceDirect subscribers only

Related works:
Working Paper: The 2007-2008 financial crisis: Is there evidence of disaster myopia? (2012)
Working Paper: The 2007-2008 financial crisis: Is there evidence of disaster myopia ? (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:13:y:2012:i:3:p:301-315

DOI: 10.1016/j.ememar.2012.02.001

Access Statistics for this article

Emerging Markets Review is currently edited by Jonathan A. Batten

More articles in Emerging Markets Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().