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Determinants of disposition effect in the real estate market: Evidence from Taiwan

Author

Listed:
  • Chao, Ching-Hsiang
  • Chang, Chuang-Chang
  • Chen, Tsung-Yu
  • Wu, Zhen-Xing

Abstract

This paper examines the disposition effect and its determinants in the Taiwanese real estate market. Our empirical results show that while a disposition effect does exist, its effects decayed after 2012. Further analyses employing quantile regression on the holding period reveal that the disposition effect persists even after investors retain assets for extended durations. Our findings also indicate that investors maintain a propensity to sell wining assets and hold losing assets even when confronted with extreme returns. Thus, we conclude that disposition effect in the real estate market could be best explained by prospect theory. Most importantly, we demonstrate that changes in the disposition effect are attributed to an enhanced information environment involving, for example, economic events, policy changes, and market conditions associated with information transparency. These findings suggest that information environment and trading volume are pivotal factors influencing households' behavioral biases.

Suggested Citation

  • Chao, Ching-Hsiang & Chang, Chuang-Chang & Chen, Tsung-Yu & Wu, Zhen-Xing, 2024. "Determinants of disposition effect in the real estate market: Evidence from Taiwan," Pacific-Basin Finance Journal, Elsevier, vol. 87(C).
    • Handle: RePEc:eee:pacfin:v:87:y:2024:i:c:s0927538x24002555
    DOI: 10.1016/j.pacfin.2024.102503
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    Keywords

    Disposition effect; Information uncertainty; Trading volume; Real estate; Quantile regression;
    All these keywords.

    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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