Credit rating agencies and risk

posted by
November 30, 2011
by Arnold Kling  
Posted in Commentary

"Sticking with the example of mortgages, an $80,000 mortgage on a condo tends to be riskier than an $80,000 mortgage on a detached home. That is because condos are 'high-beta' properties, which tend to rise more in bull markets and fall more in bear markets. Another risk factor is non-owner-occupancy. Someone who invests in a property solely to earn income will tend to exercise the default option more ruthlessly than will a family who bought the house because that is where they wish to live." (11/29/11)  

Our Sponsors