 Too Much Right Can Make a Wrong: Setting the Stage for the US Financial CrisisChapter 2 in Financial Institutions and Markets, 2010, pp 37-69 from Palgrave Macmillan Abstract: Abstract The financial crisis that started in 2007 exposed a number of flaws in the financial system. Many of these flaws were associated with financial instruments that were issued by the shadow banking system, especially securitized assets. The volume and complexity of securitized assets grew rapidly during the run-up to the financial crisis that began in 2007. This chapter discusses how the financial crisis can be viewed as a possible but logical outcome of a system where investors are overconfident, busy, and investing other peoples’ money and intermediaries are set up to take advantage of investors’ tendencies. The investor-intermediary risk cycle in this crisis is common to other crises. However, there are a number of factors that may have made the 2007 crisis more severe. Among them are the length of the precrisis period, the shift from financial intermediaries to the shadow banking system, the increasing interconnectedness among financial firms, and the increased leverage at some financial firms. Keywords: Financial Crisis; Mutual Fund; Hedge Fund; Investment Bank; Confirmation Bias (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-11736-5_2 Ordering information: This item can be ordered from Access Statistics for this chapter More chapters in Palgrave Macmillan Books from Palgrave Macmillan |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.