When Are Real Estate Flippers Smarter Than the Crowd?

42 Pages Posted: 23 Aug 2018

See all articles by Siu Kei Wong

Siu Kei Wong

University of Hong Kong

Kuang Kuang Deng

Shanghai University of Finance and Economics

K.W. Chau

The University of Hong Kong - Ronald Coase Centre for Property Rights Research - Economics

Date Written: August 14, 2018

Abstract

Real estate flippers earn higher returns than average traders in the market. By intensively searching for dumb buyers or sellers, they buy-low and sell-high to earn a monthly return that is 6.0% higher over the market returns. Their excess returns are dictated by the spread of investors’ valuation. It is higher when prices are more dispersed and there are less comparable transactions. The effects are amplified in down markets. Due to flippers’ smaller comparative advantage in search at resale than at purchase, the resale premium contributes less to the excess returns than the purchase discount. The time-varying rental income forgone negatively affects flippers’ resale premium.

Keywords: Excess Returns; Trading strategy; Search; Real Estate

JEL Classification: G14; D83; R30

Suggested Citation

Wong, Siu Kei and Deng, Kuang Kuang and Chau, Kwong Wing, When Are Real Estate Flippers Smarter Than the Crowd? (August 14, 2018). Available at SSRN: https://ssrn.com/abstract=3230587 or http://dx.doi.org/10.2139/ssrn.3230587

Siu Kei Wong (Contact Author)

University of Hong Kong ( email )

Pokfulam Road
Hong Kong, HK
China

Kuang Kuang Deng

Shanghai University of Finance and Economics ( email )

Shanghai, 200433
China

Kwong Wing Chau

The University of Hong Kong - Ronald Coase Centre for Property Rights Research - Economics ( email )

Ronald Coase Centre for Property Rights Research
Pokfulam Road
Hong Kong
Hong Kong
(852)28592128 (Phone)
(852)25599457 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
60
Abstract Views
328
rank
391,912
PlumX Metrics