TY  - JOUR
AU  - Pedersen,Lasse Heje
TI  - When Everyone Runs for the Exit
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15297
PY  - 2009
Y2  - August 2009
UR  - http://www.nber.org/papers/w15297
L1  - http://www.nber.org/papers/w15297.pdf
N1  - Author contact info:
Lasse H. Pedersen
NYU Stern Finance
44 West Fourth Street
Suite 9-190
New York, NY 10012
Tel: 212/998-0359
Fax: 212/995-4233
E-Mail: lpederse@stern.nyu.edu
AB  - The dangers of shouting "fire" in a crowded theater are well understood, but the dangers of rushing to the exit in the financial markets are more complex. Yet, the two events share several features, and I analyze why people crowd into theaters and trades, why they run, what determines the risk, whether to return to the theater or trade when the dust settles, and how much to pay for assets (or tickets) in light of this risk. These theoretical considerations shed light on the recent global liquidity crisis and, in particular, the quant event of 2007.
ER  -