Speculative Dynamics of Prices and Volume

96 Pages Posted: 30 May 2017 Last revised: 12 Aug 2022

Date Written: May 2017

Abstract

Using data on 50 million home sales from the last U.S. housing cycle, we document that much of the variation in volume came from the rise and fall in speculation. Cities with larger speculative booms have larger price booms, sharper increases in unsold listings as the market turns, and more severe busts. We present a model in which predictable price increases endogenously attract short-term buyers more than long-term buyers. Short-term buyers amplify volume by selling faster and destabilize prices through positive feedback. Our model matches key aggregate patterns, including the lead–lag price–volume relation and a sharp rise in inventories.

Suggested Citation

DeFusco, Anthony and Nathanson, Charles and Zwick, Eric, Speculative Dynamics of Prices and Volume (May 2017). NBER Working Paper No. w23449, Available at SSRN: https://ssrn.com/abstract=2976189

Anthony DeFusco (Contact Author)

Northwestern University - Kellogg School of Management ( email )

2211 Campus Drive
Evanston, IL 60208
United States

HOME PAGE: http://www.anthonydefusco.com

Charles Nathanson

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States
847-467-5141 (Phone)

HOME PAGE: http://www.charlesnathanson.com

Eric Zwick

University of Chicago - Finance ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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