Speculative Fever: Investor Contagion in the Housing Bubble
AbstractHistorical anecdotes abound of new investors being drawn into a booming asset market, only to suffer when the market turns. While the role of investor contagion in asset bubbles has been explored extensively in the theoretical literature, causal empirical evidence on the topic is much rarer. This paper studies the recent boom and bust in the US housing market and establishes that many novice investors entered the market as a direct result of observing investing activity of multiple forms in their own neighborhoods and that "infected" investors performed poorly relative to other investors along several dimensions.
CitationBayer, Patrick, Kyle Mangum, and James W. Roberts. 2021. "Speculative Fever: Investor Contagion in the Housing Bubble." American Economic Review, 111 (2): 609-51. DOI: 10.1257/aer.20171611
- D84 Expectations; Speculations
- G12 Equities; Fixed Income Securities
- G51 Household Finance: Household Saving, Borrowing, Debt, and Wealth
- R31 Housing Supply and Markets