Herding Behavior and Decision-Making within the Middle – Class Residential Property Investments

Abstract

The main purpose of this study is to investigate the causality of the behavioral bias ‘herding’ that was traced down to both social and normative influences. An experimental method was developed to test 125 participants studying finance. The experiment provides a total of 6 houses in which the participants were instructed to appraise to a value that meets their willingness to purchase. The subjects were treated with social and normative influences and their valuation shifts were observed. In total, three valuations were recorded, labeled ‘initial’, ‘social’, and ‘normative’ valuations respectively. Our findings showed that the undergraduates were susceptible to both social and normative influences. However, further analysis showed that some external factors had a role in causing the herding behavior.

Generational differences in behavioral factors affecting real estate purchase intention

“…It can even be put in contrast to overconfidence, since people who behave in this way tend to reject their own knowledge and rely on the actions of others when making decisions. This may happen due to lack of experience or familiarity with the real estate market, thus pushing people to look for answers in other people's decisions and follow them (Anastasia, 2016; Mydhili, 2019; Susanto and Anastasia, 2019a; Talpsepp and Tänav, 2021; Vuković, 2022). This behavior can also occur because of social influence and in extreme market conditions (Susanto and Anastasia, 2019b).…”

“…Observing real estate purchase from a behavioral perspective can give new insights on the drivers of real estate purchase, which most of the buyers are often unaware of. Some of the most common behavioral biases that can be recognized in any decision-making process are overconfidence and herding biases (Anastasia, 2016; Susanto and Anastasia, 2019a). While overconfidence is related to the illusion of control and perception of higher knowledge compared to other buyers, herding refers to imitating the behavior of others.…”

The Perception Reality of Sustainable Investment in Millennial and Generation Z

“…The influencer's impact on investment decisions has not been extensively studied in the past, but the herding tendency of investors has been investigated. According to Susanto and Anastasia (2019), social influence leads to herding behavior, under which investors make decisions based on recommendations from influencers or celebrities or are persuaded by them on social media (Chairunnisa & Dalimunthe, 2021). People are more susceptible to the opinions of others when they make up only 25% of the population.…”

Indonesian Stock’s Influencer Phenomenon: Did Financial Literacy on Millennial Age Reduce Herding Behavior?

“…A further question was what qualities those influencers possessed that lead investors to make investment decisions irrationally. As [25] mentioned, social influence caused a herding behavior where a person was easily influenced by the words of others when it represented a quarter of the majority. [24] stated that stock influencers in market share led to heuristic bias because investors preferred to minimize the risk in an uncertain condition.…”