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Short Term Buyers and Housing Market Dynamics

45 Pages Posted: 12 Sep 2008 Last revised: 1 Feb 2012

Robert H. Edelstein

University of California, Berkeley - Fisher Center for Real Estate and Urban Economics

Wenlan Qian

National University of Singapore - NUS Business School

Date Written: October 1, 2011

Abstract

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.

Keywords: transaction cost, trading volume, return predictability, housing market, short term investors

Suggested Citation

Edelstein, Robert H. and Qian, Wenlan, Short Term Buyers and Housing Market Dynamics (October 1, 2011). Available at SSRN: https://ssrn.com/abstract=1266166 or http://dx.doi.org/10.2139/ssrn.1266166

Robert H. Edelstein

University of California, Berkeley - Fisher Center for Real Estate and Urban Economics ( email )

Haas School of Business
Berkeley, CA 94720-1900
United States
510-643-6105 (Phone)
510-643-7357 (Fax)

Wenlan Qian (Contact Author)

National University of Singapore - NUS Business School ( email )

15 Kent Ridge Drive
Singapore 117592, 119245
Singapore
(65) 65163015 (Phone)

HOME PAGE: http://sites.google.com/site/wenlanqian/

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