Working Paper: CEPR ID: DP12591
Authors: Manuel Adelino; Kris Gerardi; Barney Hartman-Glaser
Abstract: A central result in the theory of adverse selection in asset markets is that informed sellers cansignal quality and obtain higher prices by delaying trade. This paper provides some of the firstevidence of a signaling mechanism through trade delays using the residential mortgage marketas a laboratory. We find a strong relationship between mortgage performance and time to salefor privately securitized mortgages. Additionally, deals made up of more seasoned mortgagesare sold at lower yields. These effects are strongest in the "Alt-A" segment of the market, wheremortgages are often sold with incomplete hard information, and in cases where the originatorand the issuer of mortgage-backed securities are not affliated.
Keywords: No keywords provided
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| time to sale (C41) | default risk (G33) |
| time to sale (C41) | mortgage prices (G21) |
| time to sale (C41) | default risk (for privately securitized mortgages) (G21) |
| time to sale (C41) | default risk (in the alta segment) (G33) |
| time to sale (C41) | default risk (in GSE market) (G21) |
| time to sale (C41) | signaling quality (L15) |