The Influence of Frame Dependence on Investment Decisions made by Listed Property Fund Managers in South Africa

Abstract

Behavioural finance describes investors' and managers'behaviour in terms of their interactions, andhow their behaviour subsequently influences financial and capital markets. One aspect of behavioural finance, frame dependence, reflects the fact that decision-makers may model decisions about problems using subjective frames. Such decisions may lead to errors in judgement. This study's objective was to determine whether frame dependence influences listed property fund managers in South Africa's property investment decisions.Therefore, the study examinedquestionsrelating to the disposition effect and loss aversion,as well asfactors influencing selling decisions and the time and difficulty involved in making buying and selling decisions. The study surveyed the fund managers of all South African-based property funds listed on the Johannesburg Securities Exchange (JSE). Non-parametric statistical measures were used.The resultsreveal the presence of the disposition effect and a strong desire to cut losses as a motivating factor to sell a property. In the context of the difficulties associated with, and time spent in, buying new properties, it appears that South African property fund managers are, to some extent, lossaverse. This study recommends that fund managers be alerted to the presence of frame dependence in their decisions, so that they canincorporate it in their normative investment strategies.They need to know that they are loss averse in their investment decision-making, resulting ina possible loss of perfectly positioned, profitable investment opportunities. This study expands the body of knowledge surrounding property investment decision behaviour in an emerging market.

Asset allocation decision-making practices of institutional real estate funds in a developing economy

“…Using multiple regression to analyze data obtained from property loan stock companies in South Africa, the findings revealed that the information provided by the listed companies are insufficient and of limited use for property investment decision making. Based on the analysis of the real estate investment decision-making process of listed property managers in South Africa, Lowies et al (2013) submitted that biases and human judgment such as heuristics and frame dependence propelled by human cognitive reasoning introduce behavioral bias into the real estate allocation process. This influences the asset allocation decision-making practice and impairs it from conforming to the normative model.…”

The Determinants of Investment Strategy: An Empirical Assessment of Behavioural Factors in the Omani Context

“…Country-specific studiesfor example, India (Tripathi and Chattopadhyay, 2013), Pakistan (Mahmood et al, 2016), Kenya (Arthur. 2014), Tunisia (Boussaidi, 2013) Sri Lanka (Kengatharan, 2014), and South Africa (Lowies et al, 2013) were conducted in many jurisdictions as part of academic support to capital market development in various countries. Hence, the key contribution to the literature in this paper is the attempt to fill the gap in the dearth of information on identifying the empirical behavioural factors influencing investment decisions in Oman, with emphasis on the emerging scenario in the country's capital market.…”

“…The empirical evidences are inadequate to identify the linkage between the economic growth and the development of the stock market. There is a positive correlation between real economic growth particularly in the developing countries and the stock market activities (Lowies et al, 2013;Chodorow-Reich et al, 2019). The management approach in the selection of an optimum portfolio remain critical issue for investors, analysts, and academicians.…”

“…Whereas behavioural finance studies were conducted in several other emerging securities markets such as India (Tripathi and Chattopadhyay, 2013), Pakistan (Mahmood et al, 2016), Kenya (Arthur. 2014), Tunisia (Boussaidi, 2013) Sri Lanka (Kengatharan, 2014), and South Africa (Lowies et al, 2013), to mention few, it might be clear from the above review of the literature, that empirical knowledge of behavioural attributes of capital market investment in the Omani context remains rather sparse. It would seem that the main weakness of most previous studies was the failure to subject critical behavioral assumptions such as Heuristics, Prospects, and Herding, among others, to empirical investigation in the country-specific context of the Sultanate of Oman, a growing economy in the Gulf region, strategically located for enhanced international trade.…”

Effects of Behavioural Uncertainties In Property Valuation

“…While there is substantial and growing research on the 'science' aspect of the methodological model, covering the systematic selection and mathematical analysis of comparables and parameters in ensuring property valuation validity, the descriptive 'art' behavioural property valuation uncertainty is often neglected, particularly on how property Valuers' subjective decision-making process contributes to the inaccuracy and uncertainty of valuation. Studies by Klamer et al, (2017), Kucharska-Stasiak (2013), Lowies et al, (2013), Whittle et al, (2014), Iroham et al, (2014) and Warren-Myers (2015) acknowledge this gap, and they recommend further research into the need of behavioural uncertainties of Valuers in property valuation.…”