Home Is Where the Bias Is 公开

Brincks, Stephen (Summer 2019)

Permanent URL: https://etd.library.emory.edu/concern/etds/2514nm47z?locale=zh
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Abstract

My dissertation consists of two essays, (“Home is Where the Bias Is: The Disposition Effect in the Housing Market and its Impact on the Financial Crisis,” and “How Does Political Uncertainty Impact Bank Lending? Evidence from Close US Gubernatorial Elections”). In my first essay, I study the disposition effect (i.e., the tendency for individuals to be reluctant to realize their losses) in the housing market. I find strong evidence for the disposition effect in the housing market. Homeowners are 25 times more likely to sell homes for zero-profit (break-even) than at any other price point, leave money on the table when selling homes with gains, and avoid selling homes with unrealized losses. I find a strong inverse relationship between the percentage of homes with unrealized losses and future housing sales and price appreciation at the zip code level. During the recent housing boom and bust, zip codes with the strongest disposition effect peaked a year later than zip codes with the weakest disposition effect, had a 12% smaller price run-up, and a 10% smaller crash. The evidence is consistent with the hypothesis that the disposition effect mitigated the financial crisis by reducing the housing price run-up and subsequent crash. In my second essay, I examine how political uncertainty impacts US bank lending. I find that banks reduce new lending by about 60% in the two quarters prior to close gubernatorial elections. Bank stock volatility spikes by 11% and bank stock returns are 5.7% lower in the quarter before close elections. Lending only partially recovers after close elections, suggesting that political risk persists after elections are over. My results hold for subsamples of contiguous border counties and MSAs (including matched samples) and are stronger for small banks, highly leveraged banks, and geographically concentrated banks. Using a variety of tests, I show that my lending supply-side channel is distinct from a corporate demand-side channel. Overall, the evidence suggests that political risk has a negative impact on bank lending. 

Table of Contents

ESSAY 1: Home Is Where the Bias Is: The Disposition Effect in the Housing Market       

      and its Impact on the Financial Crisis                                                                         

Section 1: Hypothesis and Introduction                                                                                      

Section 2: Data and Variable Construction                                                                                  

Section 3: Are Homeowners Reluctant to Realize Losses?                                                     

Section 4: Realization Utility and Prospect Theory Tests                                                        

Section 5: Does the Disposition Effect Impact Overall Housing Sales and Prices?                                               

Section 6: Impact of Disposition Effect on Transactions and Price Appreciation              

Section 7: The Disposition Effect and the Financial Crisis                                                      

Section 8: Conclusion of First Essay                                                                                           

ESSAY 2: How Does Political Uncertainty Impact Bank Lending? Evidence from Close US 

      Gubernatorial Elections                                                                                              

Section 9: Hypothesis and Introduction                                                                                       

Section 10: Data and Variables                                                                                                    

Section 11: Motivation and Channel                                                                                           

Section 12: Model and Identification                                                                                            

Section 13: Results                                                                                                                       

Section 14: Supply-Side or Demand-Side?                                                                                 

Section 15: Robustness                                                                                                                 

Section 16: Conclusion of Second Essay                                                                                     

References                                                                                                                                   

Figures and Tables                                                                                                                       

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