When Bear Stearns collapsed in March some insiders argued it was wrong to blame the firm’s risky bets on mortgaged-backed securities. They had another culprit: malevolent traders working together in the upside-down world of short sales -- making money by knocking down Bear’s stock. There has however been little academic research to explain the forces at work. Now Wharton finance professor Itay Goldstein and a colleague have shed some light on the process in a paper titled ”Manipulation and the Allocational Role of Prices.”
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