Role of Behavioral Biases in Real Estate Prices in Pakistan

Malik M Asad Saleem (), Zafar Muhammad (), Saif Ullah and Ullah Atta ()
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Malik M Asad Saleem: Management Sciences Department, National University of Modern Language, Islamabad
Zafar Muhammad: Management Sciences Department, National University of Modern Language, Islamabad
Ullah Atta: School of Management, Huazhong University of Science and Technology, Wuhan-China

Real Estate Management and Valuation, 2021, vol. 29, issue 1, 41-53

Abstract: The study aims to explore the effect of behavioral biases on financial decision making in the real estate sector of Pakistan. The data of a sample of 244 real estate investors are collected through a survey carried out using different sources. The findings of the study show the relationship of different biases, including overconfidence, herding effect, gambler’s fallacy, and regret aversion on prices of real estate. Real estate prices are more affected by overconfidence and gambler’s fallacy than herding effect and regrets aversion bias in Pakistan. The findings furthermore reveal that these biases do not depend on gender, education, and demographics. It is recommended to carefully consider the market factors while making decisions in real estate, as the prices do not always show the real value of the property.

Keywords: financial decision making; overconfidence bias; herding effect bias; gambler’s fallacy bias; regret aversion bias; real estate sector (search for similar items in EconPapers)
JEL-codes: D03 G11 L83 L85 P34 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:vrs:remava:v:29:y:2021:i:1:p:41-53:n:1

DOI: 10.2478/remav-2021-0005

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