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Boom and Gloom

68 Pages Posted: 19 Jun 2015  

Paul Povel

University of Houston - Department of Finance, C.T. Bauer College of Business

Giorgo Sertsios

Universidad de los Andes, Chile

Renata Kosova

Imperial College London

Praveen Kumar

University of Houston - Department of Finance

Date Written: June 16, 2015

Abstract

We study the performance of investments made at different points of an investment cycle. We use a large data set covering hotels in the U.S., with rich details on their location, characteristics and performance. We find that hotels built during hotel construction booms underperform their peers. For hotels built during local hotel construction booms, this underperformance persists for several decades. We examine possible explanations for this long-lasting underperformance. The evidence is consistent with information-based herding explanations.

Keywords: Investment cycles, booms, herding, competition, imitation

JEL Classification: G31, E32, E22, D83, R33

Suggested Citation

Povel, Paul and Sertsios, Giorgo and Kosova, Renata and Kumar, Praveen, Boom and Gloom (June 16, 2015). Journal of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2619844

Paul Povel (Contact Author)

University of Houston - Department of Finance, C.T. Bauer College of Business ( email )

University of Houston
334 Melcher Hall
Houston, TX 77204
United States
713-743-4759 (Phone)

HOME PAGE: http://www.bauer.uh.edu/povel

Giorgo Sertsios

Universidad de los Andes, Chile ( email )

Mons. Álvaro del Portillo
Las Condes
Santiago, 12.455
Chile

Renata Kosova

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

Praveen Kumar

University of Houston - Department of Finance ( email )

Houston, TX 77204
United States
713-743-4770 (Phone)
713-743-4789 (Fax)

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