BEHAVIORAL FACTORS AND INVESTMENT DECISIONS AMONG RETAIL INVESTORS IN REAL ESTATE IN NAIROBI CITY COUNTY: KENYA
Dorcas Karimi Njeru - Masters of Science (Finance), Jomo Kenyatta University of Agriculture and Technology, Kenya
Dr. Joshua Wephukulu Matanda (PhD) - Lecturer, Jomo Kenyatta University of Agriculture and Technology, Kenya
ABSTRACT
The study sought to find out the role of behavioral factors on investment decision among retail investors in real estate in Nairobi City County: Kenya. The specific objectives of the study are; to establish the role of overconfidence on investment decision among retail investors in real estate in Nairobi City County, to assess the role of herding on investment decision among retail investors in real estate in Nairobi City County, to analyze the role of anchoring on investment decision among retail investors in real estate in Nairobi City County, to evaluate the role of representativeness on investment decision among retail investors in real estate in Nairobi City County. The theories studied are regret theory, herding theory, prospect theory, theory of overconfidence and heuristic theory. The study adopted a descriptive research design with a sampling frame of a list of 26,723 of investors with mortgage accounts from 32 banks offering mortgage loans based on the Central Bank of Kenya 2021 Bank supervision annual report as at December 2021. A pilot study was undertaken on 10% of the sample size, who were investors not enlisted to take part in the study. Primary data was collected using questionnaires and analyzed using Statistical Packages for Social Scientists (SPSS). The finding of the study indicated that there exist a positive and significant relationship between anchoring an aspect behavioral characteristic and investment decision. It was also revealed that representativeness has a positive and significant effect on investment decisions. It was further noted that herding an aspect of behavioral characteristic has a positive and significant effect on investment decisions. Finally, the study established that overconfidence an aspect of behavioral characteristic has a negative and significant effect on investment decisions. It was concluded that overconfidence has a negative and significant effect on investment decision making. The study concluded that anchoring affects the investment decisions. Study conclude that herding affects investment decision making among retail investors in real estate. Finally, the study concluded that representativeness is strong predictor of investment decisions. The study recommend that investors should avoid too much overestimation whenever doing projections on how the markets are likely to behave in the future. Large groups of should be empowered with information that are requisite for decision making. The study recommends strengthening of anchoring through archiving and availing of initial information that will help investors make a rational decision. The study recommends the adoption of probability rule in making decisions among investors unlike the application of similarity rule where investors find it convenient in adopting it. Sensitization of investors especially the debutant who may not have adequate information and might end up misled by the large group when they are about to make decision. Future studies should focus on studying all the identifiable behavioral factors and legal framework when attempting to investigate investment decisions in real estate sector.