scholarly journals Selection, Leverage, and Default in the Mortgage Market

2021 ◽  
Author(s):  
Arpit Gupta ◽  
Christopher Hansman
Keyword(s):  
Moral Hazard ◽  
Adverse Selection ◽  
Natural Experiment ◽  
Causal Effect ◽  
Mortgage Market ◽  
Point Estimates ◽  
Ex Ante ◽  
Contract Structure ◽  
Adjustable Rate ◽  
Default Prevention

Abstract We ask whether the correlation between mortgage leverage and default is due to moral hazard (the causal effect of leverage) or adverse selection (ex ante risky borrowers choosing larger loans). We separate these information asymmetries using a natural experiment resulting from the contract structure of option adjustable-rate mortgages and unexpected 2008 divergence of indexes that determine rate adjustments. Our point estimates suggest that moral hazard is responsible for 40% of the correlation in our sample, while adverse selection explains 60%. We calibrate a simple model to show that leverage regulation must weigh default prevention against distortions due to adverse selection.

scholarly journals Referrals: Peer Screening and Enforcement in a Consumer Credit Field Experiment

2015 ◽  
Vol 7 (3) ◽  
pp. 174-204 ◽  
Author(s):  
Gharad Bryan ◽  
Dean Karlan ◽  
Jonathan Zinman
Keyword(s):  
South Africa ◽  
Moral Hazard ◽  
Field Experiment ◽  
Empirical Evidence ◽  
Adverse Selection ◽  
Consumer Credit ◽  
Social Pressure ◽  
Theory And Practice ◽  
Ex Post ◽  
Ex Ante

Empirical evidence on peer intermediation lags behind both theory and practice in which lenders use peers to mitigate adverse selection and moral hazard. Using a referral incentive under individual liability, we develop a two-stage field experiment that permits separate identification of peer screening and enforcement. Our key contribution is to allow for borrower heterogeneity in both ex ante repayment type and ex post susceptibility to social pressure. Our method allows identification of selection on repayment likelihood, selection on susceptibility to social pressure, and loan enforcement. Implementing our method in South Africa we find no evidence of screening but large enforcement effects. (JEL D14, D82, G21, O12, O16)

scholarly journals Le risque moral et la sélection adverse : une revue critique de la littérature

2009 ◽  
Vol 57 (2) ◽  
pp. 193-224 ◽  
Author(s):  
Georges Dionne
Keyword(s):  
Moral Hazard ◽  
Adverse Selection ◽  
Insurance Coverage ◽  
The State ◽  
Insurance Markets ◽  
The World ◽  
Ex Ante ◽  
Private And Public

ABSTRACT In this paper, we present a survey of the two main problems of information in insurance markets: moral hazard and adverse selection. Both arise because the insurers are less informed than the insureds. Moral hazard is explained by the fact that the insurer cannot observe, ex ante, the activities of the insured who may have the incentive to change the state of the world in response to insurance coverage. Adverse selection arises since the insurer cannot determine without costs, the risks inherent in the individuals. After defining formally these two problems, we shall present different insurance strategies (private and public) with a view to correct them. In conclusion we shall propose some avenues of research.

scholarly journals Optimal Contract under Moral Hazard with Soft Information

2013 ◽  
Vol 5 (4) ◽  
pp. 55-80 ◽  
Author(s):  
Guillaume Roger
Keyword(s):  
Moral Hazard ◽  
Adverse Selection ◽  
Soft Information ◽  
Optimal Contract ◽  
Strategic Complements ◽  
Ex Post ◽  
Ex Ante

I study a model of moral hazard with soft information: the agent alone observes the stochastic outcome of her action; hence the principal faces a problem of ex post adverse selection. With limited instruments the principal cannot solve these two problems independently; the ex post incentive for misreporting interacts with the ex ante incentives for effort. This affects the shape and properties of the optimal contract, which fails to elicit truthful revelation in all states. In this setup audit and transfer become strategic complements; this is rooted in the nonseparability of the problem. (JEL D82, D86)

AGENCY PROBLEM DALAM PENERAPAN PEMBIAYAAN AKAD MUDHARABAH PADA PERBANKAN SYARIAH

ALQALAM ◽  
2016 ◽  
Vol 33 (1) ◽  
pp. 46
Author(s):  
Aswadi Lubis
Keyword(s):  
High Risk ◽  
Asymmetric Information ◽  
Human Resources ◽  
Moral Hazard ◽  
Adverse Selection ◽  
Agency Problem ◽  
Agency Problems ◽  
Islamic Banking ◽  
The Public

The purpose of writing this article is to describe the agency problems that arise in the application of the financing with mudharabah on Islamic banking. In this article the author describes the use of the theory of financing, asymetri information, agency problems inside of financing. The conclusion of this article is that the financing is asymmetric information problems will arise, both adverse selection and moral hazard. The high risk of prospective managers (mudharib) for their moral hazard and lack of readiness of human resources in Islamic banking is among the factors that make the composition of the distribution of funds to the public more in the form of financing. The limitations that can be done to optimize this financing is among other things; owners of capital supervision (monitoring) and the customers themselves place restrictions on its actions (bonding).

The Causal Effect of Polls on Turnout Intention: A Local Randomization Regression Discontinuity Approach

2021 ◽  
pp. 1-7
Author(s):  
Pablo Brugarolas ◽  
Luis Miller
Keyword(s):  
Political Science ◽  
Natural Experiment ◽  
Regression Discontinuity ◽  
Time Window ◽  
Causal Effect

Abstract This letter reports the results of a study that combined a unique natural experiment and a local randomization regression discontinuity approach to estimate the effect of polls on turnout intention. We found that the release of a poll increases turnout intention by 5%. This effect is robust to a number of falsification tests of predetermined covariates, placebo outcomes, and changes in the time window selected to estimate the effect. The letter discusses the advantages of the local randomization approach over the standard continuity-based design to study important cases in political science where the running variable is discrete; a method that may expand the range of empirical topics that can be analyzed using regression discontinuity methods.

Sign in / Sign up

Export Citation Format

Share Document