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The Worth of GoodsValuation and Pricing in the Economy$
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Jens Beckert and Patrik Aspers

Print publication date: 2011

Print ISBN-13: 9780199594641

Published to Oxford Scholarship Online: April 2015

DOI: 10.1093/acprof:osobl/9780199594641.001.0001

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Forecasting as Valuation

Forecasting as Valuation

The Role of Ratings and Predictions in the Subprime Mortgage Crisis in the United States

Chapter:
(p.222) (p.223) 10 Forecasting as Valuation
Source:
The Worth of Goods
Author(s):

Akos Rona-Tas

Stefanie Hiss

Publisher:
Oxford University Press
DOI:10.1093/acprof:osobl/9780199594641.003.0010

This chapter examines the forecasting activities of consumer and corporate rating agencies as price anchoring on credit markets. Focusing on the subprime mortgage crisis in the United States, it considers the distinction between values and prices before turning to a discussion of the peculiarities of credit markets as markets for information. It then looks at five mechanisms that contributed to the intermediaries' failure in the subprime crisis: willful ignorance of the social construction of measurement, the omitted variable problem, correlated defaults, endogeneity of creditworthiness, and conflicts of interest. It views the market failure of the subprime mortgage market as a social process and suggests that the financial crisis was foremost a colossal failure of valuation.

Keywords:   forecasting, rating agencies, price anchoring, credit markets, subprime mortgage crisis, values, prices, creditworthiness, market failure, valuation

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