Financial Crisis: Contradictions between RMBS Performance and Investor Expectation

• Main Authors: Yang-Chao Wang, 王陽照
• Other Authors: 李存修
• Format: Others
• Language: zh-TW
• Published: 2015
• Online Access: http://ndltd.ncl.edu.tw/handle/k5t9kc

博士 === 國立臺灣大學 === 財務金融學研究所 === 103 === We extend the issues of market participants of residential mortgage-backed securities (RMBS), the innovation widely cited as contributing to the 2007–2008 financial crisis, and focus our attention on the investor role. We use a unique comprehensive data set, covering 92.24% of issues and over 18.1 million underlying mortgage loans over 2002–2008, the entire business cycle (growth, boom, and recession), to investigate the problems behind investor expectation. The results show that there are contradictions between determinants of RMBS performance and investor expectation. Investors ignore loan quality factors, influencing the ex-post performance most. However, they overly rely on credit ratings, only having weak predictive power. Among macroeconomic factors, RMBS performance affected by future house price trends greatly, while investors price securities primarily according to the sentiment of current house prices. The results also show that investors will require enough risk premiums at issuance if they have an ability to predict house prices to a certain degree, can see the true ratings, or retain consistent risk attitude.