In the confusion following the terrorist attacks on New York City and Washington, DC, in September 2001, some claimed that people who had prior knowledge of the attacks made huge profits in the financial markets. How would that have been possible?
The most obvious way, given the analyses provided in this chapter, would have been to sell riskier corporate bonds and buy U.S. Treasuries on the eve of the attack in expectation of a flight to quality, the mass exchange of risky assets (and subsequent price decline) for safe ones (and subsequent price increase).
Textbook link – CH 6
https://saylordotorg.github.io/text_money-and-banking-v2.0/s09-the-economics-of-interest-rate.html
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