Speculative Fever: Investor Contagion in the Housing Bubble

51 Pages Posted: 7 Mar 2016 Last revised: 17 Apr 2022

See all articles by Patrick J. Bayer

Patrick J. Bayer

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

Kyle Mangum

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

James W. Roberts

Duke University

Multiple version iconThere are 2 versions of this paper

Date Written: March 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, establishing that many novice investors entered the market as a direct result of observing investing activity of multiple forms in their own neighborhoods and that these “infected” investors performed poorly relative to other investors along several dimensions.

Suggested Citation

Bayer, Patrick J. and Mangum, Kyle and Mangum, Kyle and Roberts, James W., Speculative Fever: Investor Contagion in the Housing Bubble (March 2016). NBER Working Paper No. w22065, Available at SSRN: https://ssrn.com/abstract=2743064

Patrick J. Bayer (Contact Author)

Duke University - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Kyle Mangum

Georgia State University - Department of Economics ( email )

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Atlanta, GA 30302-3992
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Federal Reserve Bank of Philadelphia ( email )

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Philadelphia, PA 19106-1574
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James W. Roberts

Duke University ( email )

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Durham, NC 27708-0204
United States

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