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Speculative Fever: Investor Contagion in the Housing Bubble

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  • Patrick Bayer
  • Kyle Mangum
  • James W. Roberts

Abstract

Historical anecdotes of new investors being drawn into a booming asset market, only to suffer when the market turns, abound. While the role of investor contagion in asset bubbles has been explored extensively in the theoretical literature, causal empirical evidence on the topic is virtually non-existent. This paper studies the recent boom and bust in the U.S. housing market, establishing that many novice investors entered the market as a direct result of observing investing activity of multiple forms in their own neighborhoods and that these “infected” investors performed poorly relative to other investors along several dimensions.

Suggested Citation

  • Patrick Bayer & Kyle Mangum & James W. Roberts, 2016. "Speculative Fever: Investor Contagion in the Housing Bubble," NBER Working Papers 22065, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:22065
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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