Speculators and Middlemen: The Strategy and Performance of Investors in the Housing Market

Working Paper No. 16784 Housing market transactions are a matter of public record and thus provide a rare opportunity to analyze the behavior, performance, and strategies of individual investors. Using data for all housing transactions in the Los Angeles area from 1988-2009, this paper provides empi...

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Bibliographic Details
Published in:NBER Working Paper Series 2011-02, p.16784
Main Authors: Bayer, Patrick, Geissler, Christopher, Mangum, Kyle, Roberts, James W
Format: Article
Language:English
Subjects:
Decision making
Economic theory
Economics
Homeowners
Housing
Housing prices
Investments
Investor behavior
Investors
Prices
Roles
Social sciences
Speculation
Speculators
Studies
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Summary:Working Paper No. 16784 Housing market transactions are a matter of public record and thus provide a rare opportunity to analyze the behavior, performance, and strategies of individual investors. Using data for all housing transactions in the Los Angeles area from 1988-2009, this paper provides empirical evidence on investor behavior that is consistent with several rationales for speculative investment in the finance literature, including the roles of middlemen and naïve speculators. Speculative activity by novice investors increased sharply in the recent housing boom. These investors earned little more than the market rate of appreciation and demonstrated no ability to foresee market price movements.
ISSN:0898-2937
DOI:10.3386/w16784