Using unique real estate data that allows for accurately-measured capital gains, we examine whether sell propensities and selling prices depend on an owner's capital gain. We find that sell propensities are higher and selling prices are lower for properties with a capital gain, with the sell propensities experiencing a discontinuity at a zero capital gain. Consistent with realization utility (Barberis and Xiong, 2012), larger capital gains are associated with higher sell propensities and lower selling prices. Overall, our evidence provides empirical support for realization utility, while alternative explanations such as financing constraints and informed trading cannot explain our findings.
Real Estate, Disposition Effect, Realization Utility
Finance and Financial Management
HONG, Dong; LOH, Kiat Roger; and WARACHKA, Mitch.
Realization utility and real estate. (2016). Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/5234
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