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. Our findings provide empirical support for theories of realization utility.
Hong, D., Loh, R. K., & Warachka, M. (2021). Do large gains make willing sellers? Journal of Financial and Quantitative Analysis, 1–43. http://doi.org/10.1017/S0022109021000193
Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-Share Alike 4.0 License.