Publication Type

Journal Article

Version

submittedVersion

Publication Date

6-2014

Abstract

We investigate changes in the risk-relevance of securitized subprime, other nonconforming, and commercial mortgages for sponsor-originators during the recent financial crisis. Using the volatility of realized stock returns, option-implied volatility, and credit spreads, we observe a pronounced increase in the risk-relevance of subprime securitizations as early as 2006. Furthermore, reflecting the evolution of the financial crisis in waves, we find that investors recognized the increased credit risk of other nonconforming and commercial mortgage securitizations as the financial crisis progressed. Additional analyses show that risk-relevance varies cross-sectionally with structural characteristics such as monoline credit-enhancement and the presence of special servicers for commercial mortgage securitizations. Our results inform the current debates on the opacity of securitization structures and highlight the need to take into account cross-sectional and inter-temporal heterogeneity in risk-relevance across securitized asset classes and securitization characteristics (e.g., quality and type of collateral and transaction structure).

Keywords

Financial crisis, Securitizations, Subprime, Mortgages, Off-balance-sheet

Discipline

Finance and Financial Management | Portfolio and Security Analysis

Research Areas

Corporate Reporting and Disclosure

Publication

Review of Accounting Studies

Volume

19

Issue

2

First Page

839

Last Page

876

ISSN

1380-6653

Identifier

10.1007/s11142-013-9265-4

Publisher

Springer Verlag (Germany)

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1007/s11142-013-9265-4

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