TY  - JOUR
AU  - DeFusco, Anthony A
AU  - Nathanson, Charles G
AU  - Zwick, Eric
TI  - Speculative Dynamics of Prices and Volume
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 23449
PY  - 2017
Y2  - May 2017
DO  - 10.3386/w23449
UR  - http://www.nber.org/papers/w23449
L1  - http://www.nber.org/papers/w23449.pdf
N1  - Author contact info:
Anthony A. DeFusco
Northwestern University
Kellogg School of Management
2211 Campus Drive
Office 4463
Evanston, Illinois 60208
E-Mail: anthonydefusco@gmail.com

Charles G. Nathanson
Kellogg School of Management
Northwestern University
2211 Campus Drive, Room 4479
Evanston, IL 60208-0898
E-Mail: nathanson@kellogg.northwestern.edu

Eric Zwick
Booth School of Business
University of Chicago
5807 South Woodlawn Avenue
Chicago, IL 60637
Tel: 239/822-8942
E-Mail: ezwick@chicagobooth.edu
AB  - We present a dynamic theory of prices and volume in asset bubbles. In our framework, predictable price increases endogenously attract short-term investors more strongly than long-term investors. Short-term investors amplify volume by selling more frequently, and they destabilize prices through positive feedback. Our model predicts a lead–lag relationship between volume and prices, which we confirm in the 2000–2011 US housing bubble. Using data on 50 million home sales from this episode, we document that much of the variation in volume arose from the rise and fall in short-term investment.
ER  -