Question 201 pts

A Wall Street Journal article from Sept. 12, 2019 titled When Wall Street Flips Municipal Bonds, Towns and Schools Pay the Price describes the underpricing of a California school districts municipal bonds. Underpricing in primary markets appears to be common, which has led to many academic theories attempting to explain why this phenomenon occurs. What is one market friction that is at the center of many of these theories?

Group of answer choices

a.Moral hazard

b.Illiquidity

c.Adverse selection

d.Convexity