Volume Traders of Non-Homogenous Assets

Abstract

This article conducts a comprehensive analysis of the potential returns from investing in residential real property, with a special interest in any added gains due to trading larger volumes. Since the literature suggests that they are at a bargaining disadvantage, one notable finding is that individuals earn price benefits like so-called professional investors. Upon controlling for myriad well-known bargaining channels as well as investors’ demand characteristics, we find the mean price gains due to bargaining for individuals range from 4.2% for the lower volume investors (3–4 homes) to more than 7% for the highest volume traders (13 + properties). These average returns are for both buyers and sellers. Professionals exhibit bargaining acumen beginning with their first transactions (6.4%) and garner returns like individuals at higher volume levels (7.3%). The finding of investors’ bargaining effects generally increasing with greater volume implies gains in asymmetric information possibly through learning and/or reduced search costs.