Impact Of Behavioral Factors On Financial Decision Making And Investment Performance: Evidence From Real Estate And Stock Market Of Pakistan

Abstract

Although the study of finance has been going on for quite some time, a new field has emerged that puts greater emphasis on the motivations and emotions of investors: behavior finance. In contrast to traditional financial theories, behavioral finance theories focus on the role of investors' mental processes and emotions. The stock market and real estate are more susceptible to investors' irrational conduct than any other factor. This study aims to pinpoint and assess the influence of relevant behavioral components (Sentiments, herding, and social interaction). This study examines the impact of psychological factors on property investment and aims to provide data supporting this theory. Theories of herding, prospects, market value, and behavioral finance are used to investigate the effect. The information comes from a survey with a Likert-scale questionnaire filled out by 111 professionals in the real estate and stock market particularly in Pakistan. With the help of purposive sampling, we narrowed our survey participants to those actively involved in the real estate and security markets. SPSS is used to determine reliability and validity. The results of this study will assess and investigate the effect of social contact on the profitability of real estate. Apart from herd mentality, the results demonstrate that these characteristics significantly affect investment returns.

Keywords: Behavioral finance, Sentiments, herding behavior, social interaction, REITs, and Investment performance.