with Steffen Andersen, Lu Liu, Julie Marx and Tarun Ramadorai
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.

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with Tarun Ramadorai and Chihiro Shimizu
We propose a new explanation for the persistence of gravity in international investment flows based on new facts about large cross-border commercial real estate transactions. Buyers in these transactions preferentially match with counterparties from own or proximate countries; such affinity-based matching helps alleviate financial investment frictions. We set up and structurally estimate a model of capital allocation in a decentralized market with an investment friction, which delivers the price, volume, and counterparty matching patterns in the data. The model shows that if clusters of high-affinity counterparties lie along historical routes, as in the data, preferential matching can perpetuate gravity relationships.

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