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Fire Sales and House Prices: Evidence from Estate Sales Due to Sudden Death

Author

Listed:
  • Steffen Andersen

    () (Copenhagen Business School, DK-2000 Frederiksberg, Copenhagen, Denmark)

  • Kasper Meisner Nielsen

    () (Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong)

Abstract

This study investigates when forced sales of real estate turn into fire sales by using a natural experiment that allows us to separate supply and demand effects: Forced sales result from sudden death of house owners and are thus unrelated to current market conditions. We find that forced sales result in fire sale discounts. Discounts increase when the sale is urgent, market conditions are poor, and the seller is financially constrained. Overall, our study identifies when forced sales lead to fire sale discounts, and highlights that fire sales occur even in the absence of temporary demand shocks. This paper was accepted by Amit Seru, finance .

Suggested Citation

  • Steffen Andersen & Kasper Meisner Nielsen, 2017. "Fire Sales and House Prices: Evidence from Estate Sales Due to Sudden Death," Management Science, INFORMS, vol. 63(1), pages 201-212, January.
  • Handle: RePEc:inm:ormnsc:v:63:y:2017:i:1:p:201-212
    DOI: 10.1287/mnsc.2015.2292
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    File URL: http://dx.doi.org/10.1287/mnsc.2015.2292
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Andersen, Steffen & Hanspal, Tobin & Nielsen, Kasper Meisner, 2019. "Once bitten, twice shy: The power of personal experiences in risk taking," Journal of Financial Economics, Elsevier, vol. 132(3), pages 97-117.
    2. Martin Jacob, 2018. "Tax Regimes and Capital Gains Realizations," European Accounting Review, Taylor & Francis Journals, vol. 27(1), pages 1-21, January.
    3. Utpal Bhattacharya & Daisy Huang & Kasper Meisner Nielsen, 2019. "Spillovers in Asset Prices: The Curious Case of Haunted Houses," HKUST IEMS Working Paper Series 2019-63, HKUST Institute for Emerging Market Studies, revised May 2019.

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