The Risk-Adjusted Performance of Asset Flippers

65 Pages Posted: 4 Jan 2017 Last revised: 16 Oct 2018

See all articles by Marco Giacoletti

Marco Giacoletti

Marshall School of Business

Victor Westrupp

Stanford University, Graduate School of Business, Students

Date Written: January 2, 2017

Abstract

Using data from the housing market of Los Angeles County, we show that experienced asset flippers earn sizable abnormal performance with respect to both investments in the U.S. stock market and in a passive mutual fund tracking a representative U.S. REIT index. Abnormal performance is positive even after adjusting returns for a conservative estimate of the additional compensation for the specific risks of local real estate investment activities. Experienced flippers outperform their inexperienced competitors when trading comparable houses over the same time frame, but face decreasing returns to the scale of their asset portfolios.

Keywords: Risk-Adjusted Compensation, Housing, Skill, Returns to Scale

JEL Classification: G12, G23, R3

Suggested Citation

Giacoletti, Marco and Westrupp, Victor, The Risk-Adjusted Performance of Asset Flippers (January 2, 2017). Available at SSRN: https://ssrn.com/abstract=2892439 or http://dx.doi.org/10.2139/ssrn.2892439

Marco Giacoletti (Contact Author)

Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA 90089
United States

Victor Westrupp

Stanford University, Graduate School of Business, Students ( email )

Stanford, CA
United States

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