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Do Large Gains Make Willing Sellers?

Journal of Financial and Quantitative Analysis 2022 57(4), 1486-1528 open access
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.