Assessing the effectiveness of the Paulson "teaser freezer" Plan: Evidence from the ABX index
How did investors holding assets backed by subprime residential mortgages react when Treasury Secretary Paulson announced the so-called "teaser freezer" plan to modify mortgages in December 2007? We apply event-study methodology to the ABX index, the only source of daily securities prices in subprime mortgage markets. Our results show that investors initially perceived that the Paulson Plan would improve conditions in subprime housing markets. Specifically, those investors who held the riskiest securities backed by subprime residential housing benefited the most from the Paulson Plan. These findings do not extend to the longer term, suggesting that any positive effects from Paulson Plan were overwhelmed by the continued deterioration in housing markets.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Warga, Arthur & Welch, Ivo, 1993.
"Bondholder Losses in Leveraged Buyouts,"
Review of Financial Studies,
Society for Financial Studies, vol. 6(4), pages 959-82.
- Mardi Dungey & Jerry Dwyer & Tom Flavin, 2009. "Vintage and credit rating: what matters in the ABX data during the credit crunch?," Proceedings, Federal Reserve Bank of San Francisco, issue Jan.
- Brown, Stephen J. & Warner, Jerold B., 1980. "Measuring security price performance," Journal of Financial Economics, Elsevier, vol. 8(3), pages 205-258, September.
- Asquith, Paul & Wizman, Thierry A., 1990. "Event risk, covenants, and bondholder returns in leveraged buyouts," Journal of Financial Economics, Elsevier, vol. 27(1), pages 195-213, September.
- Asquith, Paul, 1948- & Wizman, Thierry A., 1990. "Event risk, covenants, and bondholder returns in leveraged buyouts," Working papers WP 3173-90., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Bollerslev, Tim, 1986.
"Generalized autoregressive conditional heteroskedasticity,"
Journal of Econometrics,
Elsevier, vol. 31(3), pages 307-327, April.
- Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
- Longstaff, Francis A., 2010. "The subprime credit crisis and contagion in financial markets," Journal of Financial Economics, Elsevier, vol. 97(3), pages 436-450, September.
- Clemente, Jesus & Montanes, Antonio & Reyes, Marcelo, 1998. "Testing for a unit root in variables with a double change in the mean," Economics Letters, Elsevier, vol. 59(2), pages 175-182, May.
- Joshua Coval & Jakub Jurek & Erik Stafford, 2009. "The Economics of Structured Finance," Journal of Economic Perspectives, American Economic Association, vol. 23(1), pages 3-25, Winter.
- Ingo Fender & Martin Scheicher, 2008. "The ABX: how do the markets price subprime mortgage risk?," BIS Quarterly Review, Bank for International Settlements, September.
- Gary B. Gorton, 2008.
"The Subprime Panic,"
NBER Working Papers
14398, National Bureau of Economic Research, Inc.
- Christopher L. Foote & Kristopher Gerardi & Paul S. Willen, 2008.
"Negative equity and foreclosure: theory and evidence,"
Public Policy Discussion Paper
08-3, Federal Reserve Bank of Boston.
- Foote, Christopher L. & Gerardi, Kristopher & Willen, Paul S., 2008. "Negative equity and foreclosure: Theory and evidence," Journal of Urban Economics, Elsevier, vol. 64(2), pages 234-245, September.
When requesting a correction, please mention this item's handle: RePEc:eee:jebusi:v:63:y:2011:i:5:p:392-411. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.