Review of Financial Studies Vol. 29 No. 2 2016
Misinformed Speculators and Mispricing in the Housing Market
Abstract
This paper examines the contribution of out-of-town second-house buyers to mispricing in the housing market. We show that demand from out-of-town second-house buyers during the mid 2000s predicted not only house-price appreciation rates but also implied-to-actual-rent-ratio appreciation rates, a proxy for mispricing. We then apply a novel identification strategy to address the issue of reverse causality. We give supporting evidence that out-of-town second-house buyers behaved like misinformed speculators, earning lower capital gains (misinformed) and consuming smaller dividends (speculators).
- DOI
- 10.1093/rfs/hhv061
- Volume
- 29
- Issue
- 2
- Pages
- 486-522
- Language
- en
- Sources
- openalex crossref