Skip to Main content Skip to Navigation
Journal articles

The 2007-2008 financial crisis: Is there evidence of disaster myopia?

Abstract : The disaster myopia hypothesis is a theoretical argument that may explain why crises are a recurrent event. Under very optimistic circumstances, investors disregard any relevant information concerning the increasing degree of risk. Agents' propensity to underestimate the probability of adverse outcomes from the distant past increases the longer the period since that event occurred and at some point the subjective probability attached to this event reaches zero. This risky behaviour may contribute to the formation of a bubble that bursts into a crisis. This paper tests whether there is evidence of disaster myopia during the recent episode of financial crisis in the banking sector. Its contribution is twofold. First, it shows that the 2007 financial crisis exhibits disaster myopia in the banking sector. And second, it identifies macro and specific determinant variables in banks' risk taking since the beginning of the years 2000.
Document type :
Journal articles
Complete list of metadatas

Cited literature [40 references]  Display  Hide  Download
Contributor : Nelly Wirth <>
Submitted on : Friday, August 26, 2011 - 11:05:20 AM
Last modification on : Thursday, April 30, 2020 - 3:12:05 PM
Long-term archiving on: : Thursday, March 30, 2017 - 2:20:47 PM


Files produced by the author(s)


  • HAL Id : halshs-00617127, version 1


Camille Cornand, Céline Gimet. The 2007-2008 financial crisis: Is there evidence of disaster myopia?. Emerging Markets Review, Elsevier, 2012, 13 (3), pp. 301-315. ⟨halshs-00617127⟩



Record views


Files downloads