The Effect Of Behavioural Biases On Investment Decisions By Real Estate Developers In Nairobi, Kenya
Abstract
Although the behavioral biases are expected to produce negative effects on investment decisions,
they do not necessarily translate to a negative effect of investments. It is therefore crucial for real
estate investors have awareness of any behavioral biases they may be prone to, and how they
could affect their investments. This research seeks to add to the existing knowledge on
behavioral biases focusing on real estate developers in Nairobi. Specifically, the study sought to
determine the effect of over confidence, conservatism, regret aversion and over optimism on real
estate developer’s decisions in Nairobi. There was a mixed research design. Population was the
total of all 112 investors in Nairobi's real estate market. Forty real estate developers were chosen
by stratified random sampling, and 200 respondents were purposefully chosen. Questionnaires
that had both open and close-ended questions was used as the data collection instrument. Data
reliability was tested using a Cronbach test. Validity was tested using internal consistency test.
Analysis of the data was done using SPSS software. The statistical techniques employed
included multiple regression analysis and descriptive statistics. From the regression analysis, the
study found that overconfidence had a positive and significant regression coefficient. This leads
to the conclusion that overconfidence has a significant positive effect on real estate decisions
among developers. The study also found that conservatism had a significant negative regression
coefficient with real estate decisions. Hence, this study concludes that conservatism has a
negative effect on real estate decisions of developers in Nairobi County. The findings also
showed that regret aversion had a positive and significant regression coefficient with real estate
decisions by the developers. Hence, this study concludes that regret aversion has a positive and
significant effect on real estate decisions in Nairobi County. Over optimism showed a positive
but insignificant regression coefficient with real estate decisions. Hence, the study concludes that
over optimism has no effect on real estate decisions among developers in Nairobi County. The
study recommends that real estate developers in Nairobi increase their level of investment
confidence; adopt the current ideas in the real estate market; research on the best investments for
future profits and take advantage of them; and have considerable optimist in their real estate
decisions.
Publisher
University of Nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
- School of Business [1521]
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