Mitigating Investor Risk Seeking Behavior in a Down Real Estate Market

Journal of Behavioral Finance, 2010

Posted: 17 Jun 2010 Last revised: 23 Aug 2010

See all articles by Michael Seiler

Michael Seiler

College of William and Mary - Finance

Vicky L. Seiler

Johns Hopkins University

Date Written: June 15, 2010

Abstract

Using an extension of the prospect theory known as false reference points, this study examines the behavior of real estate investors after experiencing a loss. The results confirm our central hypothesis that when investors attempt to avoid the pain of regret by changing the lens through which they view losses, they become more likely to hold onto bad investments. This unwillingness to sell bad investments in the short-run causes investors to be more likely to experience heightened levels of unavoidable regret in the long-run. The results hold across demographic characteristics, but are slightly more pronounced for men and international investors, specifically those from Asia.

Suggested Citation

Seiler, Michael and Seiler, Vicky L., Mitigating Investor Risk Seeking Behavior in a Down Real Estate Market (June 15, 2010). Journal of Behavioral Finance, 2010. Available at SSRN: https://ssrn.com/abstract=1625410

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

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