Effect of Regret Aversion on Investment Decisions of Real Estate Investors in Mombasa County, Kenya

Abstract

The study sought to examine the effects of regret aversion on real estate investors' investment decisions in Mombasa County, Kenya. It utilized a descriptive correlational survey methodology. The intended demographic for this study comprised of all real estate investors, as identified through the registered estate agents operating within Mombasa County. The total population include 1910 investors as per the Estate Agents Registration Board (2023). To get the sample size, the researchers used basic random sampling. The unit of study comprised all investors in the real estate sector as of December 31, 2023. The population is homogenous and thus, applying the pertinent calculation, the sample size was found to be 330. The study used primary data acquired by means of carefully administered structured questionnaires. The questionnaires were self-administered to the investors who were picked randomly. They were delivered and collected after a week to give people sufficient time to respond to the queries. The analysis of the data was conducted utilizing statistical software tailored for social science research. The initial phase of this process involved generating both inferential and descriptive statistics. Multiple regression analysis was utilized to establish how regret aversion affect investment decisions in the real estate market of Mombasa, Kenya. The study found out that regret aversion significantly affects decision making, given by p<0.05. This means that investment biases caused by regret aversion lead to a significant change in decision making by individual investors in the real estate industry in Mombasa County, Kenya. The adjusted R2 of .514, indicate that 51.4% of variations in investment decision making were because of regret aversion. The implication was that 48.6% of factors that affect investment decision making were not considered in the current study. The R value of .727 also indicated a high positive correlation between regret aversion and investment decision making. Additionally, the study discovered a slight but favourable association between gender and investment decision-making. Additionally, it was discovered that age had a negligible and indirect relationship with investment decision-making. The study also discovered that when it comes to the real estate business, investors generally show preference and conservatism. The study found that among real estate investors in Mombasa County, Kenya, regret aversion has a major impact on their decision-making. The study also found a positive, albeit small and negligible, association between respondents' income level and gender and their decision to invest. However, there was a weak and negative link between the investors' age and education level and their decision to make an investment. According to the research findings, individual investors should be encouraged to focus on a basic analysis of investments to guide their decisions, thereby avoiding the impact of regret aversion. This would allow people to focus on profits and steer clear of the negative effects of regret-aversion biases. Furthermore, when looking for income from low-risk assets, real estate investors should avoid putting capital preservation first. When choosing a financial portfolio, investors should put goals like return, risk, and liquidity ahead of subjective factors and priorities.