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Speculators and Middlemen: The Role of Flippers in the Housing Market

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  • Patrick J. Bayer
  • Christopher Geissler
  • James W. Roberts
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    Abstract

    In thinly traded markets for heterogenous, durable goods, such as housing, intermediaries may play especially important roles. Using a unique micro-level dataset of housing transactions in Los Angeles from 1988-2008 and a novel research design, we identify and measure the importance of two very distinct types of intermediaries, also known as "flippers". The first type act as middlemen who quickly match sellers and buyers, operate throughout housing market cycles and earn above average returns when they buy and sell. The second type act as speculators who attempt to time markets by holding assets for longer periods of time, perform relatively poorly when buying and selling and are strongly associated with price instability in their targeted areas. The presence of these unsophisticated speculators and positive feedback trading contribute the first pieces of evidence from the housing market to a growing body of work in other financial markets that questions whether speculators always act to stabilize prices.

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    Bibliographic Info

    Paper provided by Duke University, Department of Economics in its series Working Papers with number 11-03.

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    Length: 29
    Date of creation: 2011
    Date of revision:
    Handle: RePEc:duk:dukeec:11-03

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    Postal: Department of Economics Duke University 213 Social Sciences Building Box 90097 Durham, NC 27708-0097
    Phone: (919) 660-1800
    Fax: (919) 684-8974
    Web page: http://econ.duke.edu/

    Related research

    Keywords: Speculation; Housing Markets; Asset Pricing; Behavioral Finance; Financial Intermediaries; Middlemen;

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    Cited by:
    1. Pablo Kurlat & Johannes Stroebel, 2014. "Testing for Information Asymmetries in Real Estate Markets," NBER Working Papers 19875, National Bureau of Economic Research, Inc.
    2. Todd Sinai, 2012. "House Price Moments in Boom-Bust Cycles," NBER Chapters, in: Housing and the Financial Crisis, pages 19-68 National Bureau of Economic Research, Inc.
    3. Yuming Fu & Wenlan Qian & Bernard Yeung, 2013. "Speculative Investors and Tobin’s Tax in the Housing Market," NBER Working Papers 19400, National Bureau of Economic Research, Inc.
    4. Kevin Haninger & Lala Ma & Christopher Timmins, 2014. "The Value of Brownfield Remediation," NBER Working Papers 20296, National Bureau of Economic Research, Inc.

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