Speculative Fever: Investor Contagion in the Housing Bubble

Patrick J. Bayer, Kyle Mangum, James W. Roberts
2016 Social Science Research Network  
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
more » ... ctivity of multiple forms in their own neighborhoods and that these "infected" investors performed poorly relative to other investors along several dimensions.
doi:10.2139/ssrn.2740483 fatcat:nnefm2qwizh7zk6flrhxdh6hhq