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Cited by 111Housing Market and EconomicsDecision-Making and Behavioral EconomicsFinancial Markets and Investment Strategies

Reference Dependence in the Housing Market

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Andersen, Steffen, Badarinza, Cristian, Liu, Lu, Marx, Julie, Ramadorai, Tarun·2022·American Economic Review
DOI 10.1257/aer.20191766
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Abstract

We quantify reference dependence and loss aversion in the housing market using rich Danish administrative data. Our structural model includes loss aversion, reference dependence, financial constraints, and a sale decision, and matches key nonparametric moments, including a “hockey stick” in listing prices with nominal gains, and bunching at zero realized nominal gains. Households derive substantial utility from gains over the original house purchase price; losses affect households roughly 2.5 times more than gains. The model helps explain the positive correlation between aggregate house prices and turnover, but cannot explain visible attenuation in reference dependence when households are more financially constrained. (JEL D12, D91, G51, R21, R31)

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Authors
Andersen, S., Badarinza, C., Liu, L., Marx, J., & Ramadorai, T.
Affiliations
  • Copenhagen Business School (DK)
  • National University of Singapore (SG)
  • University of Pennsylvania (US)
  • Centre for Economic Policy Research (GB)
ORCID
Venue
American Economic Review
Publisher
American Economic Association
Published
2022-10-01
Volume
112
Issue
10
Pages
3398-3440
ISSN
0002-8282 (ISSN-L)
DOI
10.1257/aer.20191766
OpenAlex
W3122820076
Cited by
111
References
60
Citations by year
2026: 18 · 2025: 30 · 2024: 17 · 2023: 14 · 2022: 16 · 2021: 8 · 2020: 4 · 2019: 1 · 2018: 1 · 2017: 1 · 2016: 1
FWCI
15.49
Type
journal article
Language
en
Open access
Licence
other-oa
Locations
  • American Economic Review (publishedVersion)
  • CBS Research Portal (Copenhagen Business School) (submittedVersion, other-oa)
  • RePEc: Research Papers in Economics (submittedVersion)
  • Spiral (Imperial College London) (submittedVersion)
Topics
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Housing Market and Economics
  • Social Sciences › Decision Sciences › General Decision Sciences › Decision-Making and Behavioral Economics
  • Social Sciences › Economics, Econometrics and Finance › Finance › Financial Markets and Investment Strategies
Keywords
reference dependence, loss aversion, housing market, housing prices, financial constraints, listing prices, bunching, household utility

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