At the Top of the Mind: Peak Prices and the Disposition Effect

Quispe-Torreblanca, Edika; Hume, David; Gathergood, John; Loewenstein, George; Stewart, Neil

Abstract

The disposition effect is the reluctance to sell assets at a loss relative to a salient point of reference, typically assumed to be the purchase price. Using data on stocks and housing sales, we show that the peak price achieved by an asset during the investor's period of holding constitutes an additional salient reference point for asset owners that overlaps, and interacts, with the purchase price reference point. Peaks occurring before the investor purchased the asset do not aaect future sales, indicating that ownership affects how investors form reference points.

Citation

Quispe-Torreblanca, E., Hume, D., Gathergood, J., Loewenstein, G., & Stewart, N. (in press). At the Top of the Mind: Peak Prices and the Disposition Effect. Journal of Political Economy Microeconomics,

• Journal Article Type: Article
• Acceptance Date: Aug 19, 2024
• Deposit Date: Aug 20, 2024
• Print ISSN: 2832-9368
• Electronic ISSN: 2832-9376
• Publisher: University of Chicago Press
• Peer Reviewed: Peer Reviewed
• Keywords: reference points; disposition effect; selling homes; investor behaviour
• Public URL: https://nottingham-repository.worktribe.com/output/38637215