Loss aversion and focal point bias: Empirical evidence from housing markets

Stephen L. Ross and Tingyu Zhou

Journal of Behavioral and Experimental Finance, 2024, vol. 42, issue C

Abstract: Most research documenting correlation between behavioral biases use survey or experimental data, often focusing on related biases. We test whether evidence of loss aversion in housing sales prices is stronger among individuals who exhibited focal point tendencies when selecting their mortgage amount at purchase, allowing for market impacts of both behavioral biases in high-stakes contexts. We find a strong positive relationship between the effects of facing a loss on eventual sales prices and whether sellers selected a round mortgage amount during their initial purchase. Further, we show that selecting round mortgage amounts is persistent within borrowers over time.

Keywords: Housing sales; Loss aversion; Anchoring; Mortgage; Behavioral bias; Round numbers; Focal point bias; House prices; Sale likelihood (search for similar items in EconPapers)
JEL-codes: D91 G12 G41 R21 R31 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S2214635024000455

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:beexfi:v:42:y:2024:i:c:s2214635024000455

DOI: 10.1016/j.jbef.2024.100930

Access Statistics for this article

Journal of Behavioral and Experimental Finance is currently edited by Michael Dowling and Jürgen Huber

More articles in Journal of Behavioral and Experimental Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().