Do Large Gains Make Willing Sellers?

40 Pages Posted: 14 Oct 2014 Last revised: 11 Apr 2019

See all articles by Dong Hong

Dong Hong

Singapore Management University - Lee Kong Chian School of Business

Roger Loh

Singapore Management University - Lee Kong Chian School of Business

Mitch Warachka

Chapman University

Date Written: April 9, 2019

Abstract

Using unique real estate data that allow for accurately-measured capital gains, we examine whether sell propensities and selling prices depend on the magnitude of a seller's capital gain. We find that sell propensities are higher and selling prices are lower for properties with a larger gain. Sell propensities also experience a discontinuity at a zero capital gain. Our findings provide empirical support for realization utility (Barberis and Xiong, 2012) but are inconsistent with informed trading and financing constraints.

Keywords: Real Estate, Sell Propensity, Capital Gains, Realization Utility

JEL Classification: G2, G11, R21

Suggested Citation

Hong, Dong and Loh, Roger and Warachka, Mitch, Do Large Gains Make Willing Sellers? (April 9, 2019). Available at SSRN: https://ssrn.com/abstract=2509599 or http://dx.doi.org/10.2139/ssrn.2509599

Dong Hong

Singapore Management University - Lee Kong Chian School of Business ( email )

50 Stamford Road
178899
Singapore

Roger Loh (Contact Author)

Singapore Management University - Lee Kong Chian School of Business ( email )

Lee Kong Chian School of Business
50 Stamford Rd
Singapore, 178899
Singapore

HOME PAGE: http://www.mysmu.edu/faculty/rogerloh/

Mitch Warachka

Chapman University ( email )

Orange, CA 92866
United States

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