Date Added: Feb 2011
In thinly traded markets for heterogeneous, durable goods, such as housing, intermediaries may play especially important roles. Using a unique micro-level dataset of housing transactions in Los Angeles from 1988-2008 and a novel research design, the authors identify and measure the importance of two very distinct types of intermediaries, also known as "Flippers". The first type act as middlemen who quickly match sellers and buyers, operate throughout housing market cycles and earn above average returns when they buy and sell. The second type act as speculators who attempt to time markets by holding assets for longer periods of time, perform relatively poorly when buying and selling and are strongly associated with price instability in their targeted areas.