Abstract
In normal times, investors buy and sell financial assets because there are gains from trade. However, markets do not always function properly — they sometimes “freeze.” An example is the collapse of trading in mortgage-backed securities during the recent financial crisis. Why does trade break down despite the potential gains from trade? Can the government intervene to restore the normal functioning of markets? In “Why Do Markets Freeze?,” Yaron Leitner explains what a market freeze is and some of the theories as to why these freezes occur.
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