Short Term Buyers and Housing Market Dynamics
Robert H. Edelstein
University of California, Berkeley - Fisher Center for Real Estate and Urban Economics
National University of Singapore - NUS Business School
October 1, 2011
This study shows that taking into consideration heterogeneous investment horizons improves our understanding of price and trading dynamics.We develop an OLG model in which agents have heterogeneous preferences and investment horizons. With transaction costs, short term investors are more sensitive to changes in fundamentals and are less likely to own (and trade) in a declining market. The model predicts that the ownership composition contains information about current and future price and trading dynamics. Empirically we find that owners' expected holding horizons co-vary negatively with prices, and they also predict future (short term) returns.
Number of Pages in PDF File: 45
Keywords: transaction cost, trading volume, return predictability, housing market, short term investorsworking papers series
Date posted: September 12, 2008 ; Last revised: February 1, 2012
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