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

41 Pages Posted: 3 Feb 2011 Last revised: 31 Jan 2015

See all articles by Patrick J. Bayer

Patrick J. Bayer

Duke University - Department of Economics; National Bureau of Economic Research (NBER)

Christopher Geissler

Duke University

Kyle Mangum

Federal Reserve Bank of Philadelphia; Georgia State University - Department of Economics

James W. Roberts

Duke University

Multiple version iconThere are 2 versions of this paper

Date Written: January 13, 2015

Abstract

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 na¨ıve 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.

Keywords: Speculation, Housing Markets, Asset Pricing, Financial Intermediaries, Middlemen, Market Microstructure, Price Volatility, Booms, Busts

JEL Classification: D40, D84, R30

Suggested Citation

Bayer, Patrick J. and Geissler, Christopher and Mangum, Kyle and Mangum, Kyle and Roberts, James W., Speculators and Middlemen: The Strategy and Performance of Investors in the Housing Market (January 13, 2015). Economic Research Initiatives at Duke (ERID) Working Paper No. 93, Available at SSRN: https://ssrn.com/abstract=1754003 or http://dx.doi.org/10.2139/ssrn.1754003

Patrick J. Bayer (Contact Author)

Duke University - Department of Economics ( email )

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Box 90097
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National Bureau of Economic Research (NBER)

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Christopher Geissler

Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
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Kyle Mangum

Georgia State University - Department of Economics ( email )

P.O. Box 3992
Atlanta, GA 30302-3992
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Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

James W. Roberts

Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

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