Impact of behavioral biases on investment decisions in the Kenyan real estate market

Abstract

Investment decisions in the real estate market are influenced by various psychological biases, affecting the rationality of investors. The Kenyan real estate market serves as the research site to investigate the effects of overconfidence bias alongside herding behavior on investment decisions. Utilizing a mixed-methods approach, the research collects primary data from individual real estate investors in Nairobi through structured questionnaires. The study employs correlation and regression analysis to assess the relationship between behavioral biases and investment choices. Findings indicate that overconfidence bias leads investors to overestimate their ability to predict market trends, while herding behavior drives irrational investment decisions based on peer influence rather than fundamental market analysis. The study highlights the need for investor education and regulatory interventions to mitigate the adverse effects of behavioral biases. The research contributes to the growing field of behavioral finance by offering insights into psychological influences on real estate investments in an emerging market context.