The Risk-Adjusted Performance of Asset Flippers
65 Pages Posted: 4 Jan 2017 Last revised: 16 Oct 2018
Date Written: January 2, 2017
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: Suggested Citation