Speculative Fever: Investor Contagion in the Housing Bubble

Economic Research Initiatives at Duke

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Date Published 2016
Primary Author Patrick Bayer, Kyle Mangum, and James W. Roberts
Other Authors
Theme Real Estate Cycles and Bubbles


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, 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.

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