When a credit risk manager analyzes default patterns in a specific neighborhood, she finds that defaults are increasing as the stigma of default evaporates, and more borrowers default.

When a credit risk manager analyzes default patterns in a specific neighborhood, she finds that defaults are increasing as the stigma of default evaporates, and more borrowers default.

This phenomenon constitutes
A . Moral hazard
B . Speculative bias
C . Herd behavior
D . Adverse selection

View Answer

Answer: C