Do Large Gains Make Willing Sellers?

Forthcoming in Journal of Financial and Quantitative Analysis

50 Pages Posted: 14 Oct 2014 Last revised: 28 Dec 2021

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 - The George L. Argyros College of Business and Economics

Date Written: December 27, 2021

Abstract

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).

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

JEL Classification: G2, G11, R21

Suggested Citation

Hong, Dong and Loh, Roger and Warachka, Mitch, Do Large Gains Make Willing Sellers? (December 27, 2021). Forthcoming in Journal of Financial and Quantitative Analysis, 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 - The George L. Argyros College of Business and Economics ( email )

1 University Drive
Orange, CA 92866
United States

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