Speculative Fever: Investor Contagion in the Housing Bubble

51 Pages Posted: 2 Mar 2016  

Patrick J. Bayer

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

Kyle Mangum

Georgia State University - Department of Economics

James W. Roberts

Duke University

Multiple version iconThere are 2 versions of this paper

Date Written: February 1, 2016

Abstract

Historical anecdotes of new investors being drawn into a booming asset market, only to suffer when the market turns, abound. While the role of investor contagion in asset bubbles has been explored extensively in the theoretical literature, causal empirical evidence on the topic is virtually non-existent. This paper studies the recent boom and bust in the U.S. housing market, and establishes that many novice investors entered the market as a direct result of observing investing activity of multiple forms in their own neighborhoods, and that “infected” investors performed poorly relative to other investors along several dimensions.

Keywords: Speculation, Housing Markets, Asset Pricing, Financial Intermediaries, Asset Bubbles, Contagion

JEL Classification: D40, D84, R30

Suggested Citation

Bayer, Patrick J. and Mangum, Kyle and Roberts, James W., Speculative Fever: Investor Contagion in the Housing Bubble (February 1, 2016). Economic Research Initiatives at Duke (ERID) Working Paper No. 211. Available at SSRN: https://ssrn.com/abstract=2740483 or http://dx.doi.org/10.2139/ssrn.2740483

Patrick J. Bayer (Contact Author)

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Kyle Mangum

Georgia State University - Department of Economics ( email )

P.O. Box 3992
Atlanta, GA 30302-3992
United States

James W. Roberts

Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

Paper statistics

Downloads
238
Rank
94,413
Abstract Views
890