Is There A Disposition Effect In Corporate Investment Decisions

is there a disposition effect in corporate investment decisions

While several studies have documented behavioral biases in the behavior of individual investors, very little is known about the existence of such biases in corporations. We utilize the unique nature of Real Estate Investment Trusts (REITs) to test for the presence of one of the most widely discussed biases, the disposition effect. Using property level REIT data, we find strong statistical evidence that REITs tend to sell winners and hold losers, where winners and losers are defined using changes in properties’ prices since they were acquired.