What Makes Housing Owners Hold?

17 Pages Posted: 11 Sep 2008

See all articles by Edward Chung Yim Yiu

Edward Chung Yim Yiu

University of Auckland Business School

K.W. Chau

The University of Hong Kong - Ronald Coase Centre for Property Rights Research - Economics

Siu Kei Wong

University of Hong Kong

Date Written: September 10, 2008

Abstract

Many financial studies have produced evidence of the disposition effect - investors tend to sell assets with nominal gains and keep those with nominal losses. This effect is predominantly explained by the prospect theory, which postulates asymmetric preferences towards gains against losses. This study aims to examine what factors determine housing owners to hold. We postulate that holding period is a function of 1) household characteristics, 2) property attributes, and 3) disposition effect of nominal gain or loss. These postulates are tested empirically by a panel data set of housing transactions in one of the largest estate in Hong Kong of 15,235 transactions from 1991 to 2005. The results show that losers tend to hold 32 months longer than winners, but this magnitude is found to be much longer than other similar studies in securities trading. We contend that moving costs and asymmetric information in housing markets is responsible for such a difference.

Keywords: Disposition Effect, Prospect Theory, Holding Period, Housing Markets

JEL Classification: D12

Suggested Citation

Yiu, Edward Chung Yim and Chau, Kwong Wing and Wong, Siu Kei, What Makes Housing Owners Hold? (September 10, 2008). Available at SSRN: https://ssrn.com/abstract=1265943 or http://dx.doi.org/10.2139/ssrn.1265943

Edward Chung Yim Yiu (Contact Author)

University of Auckland Business School ( email )

Sir Owen G Glenn Building
12 Grafton Road
Auckland, 1024
New Zealand
+64 923 3913 (Phone)

HOME PAGE: http://https://unidirectory.auckland.ac.nz/people/profile/edward-yiu

Kwong Wing Chau

The University of Hong Kong - Ronald Coase Centre for Property Rights Research - Economics ( email )

Ronald Coase Centre for Property Rights Research
Pokfulam Road
Hong Kong
Hong Kong
(852)28592128 (Phone)
(852)25599457 (Fax)

Siu Kei Wong

University of Hong Kong ( email )

Pokfulam Road
Hong Kong, HK
China

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