Sean King

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Knoxville, Tennessee, United States

Tuesday, April 7, 2009

Markets Work

The government's official view that toxic assets are incorrectly priced due to illiquidity "fire sales" is wrong, a new study by Harvard and Princeton finance professors suggests.

You can read the whole paper by Harvard's Joshua Coval and Erik Stafford and Princeton's Jakub Jurek below. The striking conclusion is that the low prices of toxic assets actually reflect the fundamentals, rather than being driven by an illiquidity discount.


(via Instapundit)

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