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Role of Behavioral Biases in Real Estate Prices in Pakistan

Author

Listed:
  • 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 Saif

    (Management Sciences Department, SZABIST, Karachi)

  • Ullah Atta

    (School of Management, Huazhong University of Science and Technology, Wuhan-China)

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.

Suggested Citation

  • Malik M Asad Saleem & Zafar Muhammad & Ullah Saif & Ullah Atta, 2021. "Role of Behavioral Biases in Real Estate Prices in Pakistan," Real Estate Management and Valuation, Sciendo, vol. 29(1), pages 41-53, March.
    • Handle: RePEc:vrs:remava:v:29:y:2021:i:1:p:41-53:n:1
    DOI: 10.2478/remav-2021-0005
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    More about this item

    Keywords

    financial decision making; overconfidence bias; herding effect bias; gambler’s fallacy bias; regret aversion bias; real estate sector;
    All these keywords.

    JEL classification:

    • P34 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Finance
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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