Do large gains make willing sellers?

• Main Authors: HONG, Dong, LOH, Roger, WARACHKA, Mitch
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2022
• Subjects: Real Estate; Sell Propensity; Capital Gains; Realization Utility; Disposition Effect; Asian Studies; Finance and Financial Management
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/5234; https://ink.library.smu.edu.sg/context/lkcsb_research/article/6233/viewcontent/do_large_gains_make_willing_sellers.pdf
• Institution: Singapore Management University

Using unique real estate data that allow for accurately-measured capital gains, we examine whether sell propensities depend on the magnitude of a seller's capital gain. We find that short-term sell propensities are flat over losses and increasing in gains. Consistent with their higher sell propensities, selling prices are lower for properties with larger gains. Large-sized short-term stock investments also have sell propensities that are flat over losses and increasing in gains, although the sell propensities of typical-sized short-term stock investments are V-shaped (Ben-David and Hirshleifer (2012)). Our findings provide empirical support for the realization utility theories of Barberis and Xiong (2012) as well as Ingersoll and Jin (2013).