Speculative dynamics of prices and volume

Anthony DeFusco, Charles G. Nathanson and Eric Zwick

Journal of Financial Economics, 2022, vol. 146, issue 1, 205-229

Abstract: Using data on 50 million home sales from the last U.S. housing cycle, we document that much of the variation in volume came from the rise and fall in speculation. Cities with larger speculative booms have larger price booms, sharper increases in unsold listings as the market turns, and more severe busts. We present a model in which predictable price increases endogenously attract short-term buyers more than long-term buyers. Short-term buyers amplify volume by selling faster and destabilize prices through positive feedback. Our model matches key aggregate patterns, including the lead–lag price–volume relation and a sharp rise in inventories.

Keywords: Bubbles; Housing cycles; Speculation; Transaction volume (search for similar items in EconPapers)
JEL-codes: G4 R3 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (14)

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Related works:
Working Paper: Speculative Dynamics of Prices and Volume (2017)
Working Paper: Speculative Dynamics of Prices and Volume (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:146:y:2022:i:1:p:205-229

DOI: 10.1016/j.jfineco.2022.07.002

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