Mental Accounting and False Reference Points in Real Estate Investment Decision-Making

Journal of Behavioral Finance, Forthcoming

27 Pages Posted: 17 Jun 2010 Last revised: 22 Jun 2010

See all articles by Michael Seiler

Michael Seiler

College of William and Mary - Finance

Vicky L. Seiler

Johns Hopkins University

Mark Lane

affiliation not provided to SSRN

Date Written: June 15, 2010

Abstract

This study examines a number of behavioral finance issues as they relate to real estate investments. We find a statistically significant degree of mental accounting at all points throughout the disposition effect curve when holding a real estate investment in isolation versus holding the asset as part of a mixed-asset portfolio. We also identify four distinct disposition curve shapes beyond the traditional “S-shaped” curve where investors are more willing to sell an asset that is in the gains domain. Further, we conclude that an investor’s willingness to sell jumps by the greatest amount when going from zero return into profitable territory. Finally, this false reference point does take into consideration transaction costs.

Keywords: mental accounting, false reference points, disposition effect, behavioral real estate

Suggested Citation

Seiler, Michael and Seiler, Vicky L. and Lane, Mark, Mental Accounting and False Reference Points in Real Estate Investment Decision-Making (June 15, 2010). Journal of Behavioral Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1625407

Michael Seiler (Contact Author)

College of William and Mary - Finance ( email )

VA
United States

HOME PAGE: http://mason.wm.edu/faculty/directory/seiler_m.php

Vicky L. Seiler

Johns Hopkins University ( email )

Baltimore, MD 20036-1984
United States

Mark Lane

affiliation not provided to SSRN ( email )

Register to save articles to
your library

Register

Paper statistics

Downloads
575
Abstract Views
2,325
rank
46,116
PlumX Metrics