Reference Dependence in the Housing Market

Steffen Andersen; Cristian Badarinza; Lu Liu; Julie Marx; Tarun Ramadorai

Reference Dependence in the Housing Market

Steffen Andersen, Cristian Badarinza, Lu Liu, Julie Marx, Tarun Ramadorai

Department of Finance

Research output: Contribution to conference › Paper › Research › peer-review

Abstract

We model listing decisions in the housing market, and structurally estimate household preference and constraint parameters using comprehensive Danish data. Sellers optimize expected utility from property sales, subject to down-payment constraints, and internalize the effect of their choices on final sale prices and time-on-the-market. The data exhibit variation in the listing price-gains relationship with "demand concavity"; bunching in the sales distribution; and a rising listing propensity with gains. A new fact is that gains and down-payment constraints have interactive effects on listing prices. We find reference-dependence around the nominal purchase price and modest loss-aversion, but our canonical model cannot fully explain the new facts.

Original language	English
Publication date	2020
Number of pages	54
Publication status	Published - 2020
Event	The 47th European Finance Association Annual Meeting. EFA 2020 - Virtual from The Aalto University School of Business, Helsinki, Finland Duration: 20 Aug 2020 → 21 Aug 2020 Conference number: 47 https://efa2020.efa-meetings.org/

Conference

Conference	The 47th European Finance Association Annual Meeting. EFA 2020
Number	47
Location	Virtual from The Aalto University School of Business
Country/Territory	Finland
City	Helsinki
Period	20/08/2020 → 21/08/2020
Internet address	https://efa2020.efa-meetings.org/

Access to Document

https://www.conftool.com/efa2020/index.php/1974-BF-EFA2020-Reference_Dependence_in_the_Housing_Market.pdf?page=downloadPaper&filename=1974-BF-EFA2020-Reference_Dependence_in_the_Housing_Market.pdf&form_id=1974&form_version=finalLicence: Unspecified

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Andersen, S., Badarinza, C., Liu, L., Marx, J., & Ramadorai, T. (2020). Reference Dependence in the Housing Market. Paper presented at The 47th European Finance Association Annual Meeting. EFA 2020, Helsinki, Finland. https://www.conftool.com/efa2020/index.php/1974-BF-EFA2020-Reference_Dependence_in_the_Housing_Market.pdf?page=downloadPaper&filename=1974-BF-EFA2020-Reference_Dependence_in_the_Housing_Market.pdf&form_id=1974&form_version=final

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Andersen, S, Badarinza, C, Liu, L, Marx, J & Ramadorai, T 2020, 'Reference Dependence in the Housing Market', Paper presented at The 47th European Finance Association Annual Meeting. EFA 2020, Helsinki, Finland, 20/08/2020 - 21/08/2020. <https://www.conftool.com/efa2020/index.php/1974-BF-EFA2020-Reference_Dependence_in_the_Housing_Market.pdf?page=downloadPaper&filename=1974-BF-EFA2020-Reference_Dependence_in_the_Housing_Market.pdf&form_id=1974&form_version=final>

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T1 - Reference Dependence in the Housing Market

AU - Andersen, Steffen

AU - Badarinza, Cristian

AU - Liu, Lu

AU - Marx, Julie

AU - Ramadorai, Tarun

N1 - Conference code: 47

PY - 2020

Y1 - 2020

N2 - We model listing decisions in the housing market, and structurally estimate household preference and constraint parameters using comprehensive Danish data. Sellers optimize expected utility from property sales, subject to down-payment constraints, and internalize the effect of their choices on final sale prices and time-on-the-market. The data exhibit variation in the listing price-gains relationship with "demand concavity"; bunching in the sales distribution; and a rising listing propensity with gains. A new fact is that gains and down-payment constraints have interactive effects on listing prices. We find reference-dependence around the nominal purchase price and modest loss-aversion, but our canonical model cannot fully explain the new facts.

AB - We model listing decisions in the housing market, and structurally estimate household preference and constraint parameters using comprehensive Danish data. Sellers optimize expected utility from property sales, subject to down-payment constraints, and internalize the effect of their choices on final sale prices and time-on-the-market. The data exhibit variation in the listing price-gains relationship with "demand concavity"; bunching in the sales distribution; and a rising listing propensity with gains. A new fact is that gains and down-payment constraints have interactive effects on listing prices. We find reference-dependence around the nominal purchase price and modest loss-aversion, but our canonical model cannot fully explain the new facts.

M3 - Paper

T2 - The 47th European Finance Association Annual Meeting. EFA 2020

Y2 - 20 August 2020 through 21 August 2020

ER -