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Article
Publication date: 1 June 2004

J. Andrew Hansz

American real estate appraisers given identical valuation problems produced statistically different value estimates. The measured variable between experimental groups was…

Abstract

American real estate appraisers given identical valuation problems produced statistically different value estimates. The measured variable between experimental groups was an agency‐client treatment operationalized as a pending mortgage scenario. This finding is consistent with the view of anchoring as a routinized response to agent‐client concerns. Experienced appraisers may develop heuristic behaviors which subconsciously sensitizes them to agency‐client considerations. Although further research is warranted, this study provides initial experimental evidence of a causal link between agency‐client concerns and valuation bias.

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Journal of Property Investment & Finance, vol. 22 no. 3
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 1 December 2000

Paul Gallimore, J. Andrew Hansz and Adelaide Gray

The literature on investor decision‐making behaviour in property investment is sparse, loosely integrated and focused principally upon large, institutional investors. It…

Abstract

The literature on investor decision‐making behaviour in property investment is sparse, loosely integrated and focused principally upon large, institutional investors. It reflects rational, normative models that treat investor behaviour as highly structured and formalised. By contrast, behavioural psychology suggests that individuals frequently act sub‐optimally. These ideas have been explored in financial decision making and have been found in the actions of property valuers and property lenders. This paper addresses this neglected area of property investment decision‐making. Semi‐structured interviews were conducted with a sample of property investment directors of smaller property companies. The interviews investigate the decision‐making structures in these companies, the process by which investment strategy is formulated, the investment “screening” process and the determinants of purchase/sell decisions. The findings are discussed and related to the literature on decision making under uncertainty.

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Journal of Property Investment & Finance, vol. 18 no. 6
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 1 August 1997

Julian Diaz and J. Andrew Hansz

Theory suggest that valuers will rely on previous values estimates in the face of greater market uncertainty. Nevertheless recent research has provided evidence that…

Abstract

Theory suggest that valuers will rely on previous values estimates in the face of greater market uncertainty. Nevertheless recent research has provided evidence that experienced real estate valuers (appraisers) working in geographic areas familiar to them may not be influenced by the previous value judgement of other, anonymous experts. Presents a study which extends the previous investigation by examining appraisers valuing property in geographic areas unfamiliar to them, appraisers who therefore face significant market uncertainty. In controlled experiments valuers were asked to appraise a subject property in an area unfamiliar to them and were offered the previous value judgement of an anonymous expert as a potential anchor (reference point). A control group of experts unfamiliar with the subject market was given no reference point whatsoever. Evaluation of the experimental data revealed evidence that unlike subjects operating in areas of familiarity, subjects unfamiliar with the subject area were influenced by the provided reference point.

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Journal of Property Valuation and Investment, vol. 15 no. 3
Type: Research Article
ISSN: 0960-2712

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Article
Publication date: 18 September 2019

Abdul-Rasheed Amidu, David Boyd and Fernand Gobet

Behavioural studies of valuers have suggested that valuers rely on a number of cognitive strategies involving reasoning and intuition when undertaking a valuation task…

Abstract

Purpose

Behavioural studies of valuers have suggested that valuers rely on a number of cognitive strategies involving reasoning and intuition when undertaking a valuation task. However, there are few studies of the actual reasoning mechanisms in valuation. In other fields, much attention has been paid to forward and backward reasoning, as this shows the choices and decisions that are made in undertaking a complex task. This paper studied this during a valuation task. The purpose of this paper is twofold: first, to develop a methodological approach for empirical research on valuers’ reasoning, and, second, to report expert-novice differences on valuers’ use of forward and backward reasoning during a valuation problem solving.

Design/methodology/approach

The study utilised a verbal protocol analysis (VPA) to elicit think-aloud data from a purposive sample of a group of valuers of different levels of expertise undertaking a commercial-valuation task. Through a content analysis interpretive strategy, the transcripts were analysed into different cognitive segments identifying the forward and backward reasoning strategies.

Findings

The findings showed that valuers accomplished the valuation task by dividing the overall problem into sub-problems. These sub-problems are thereafter solved by integrating available data with existing knowledge by relying more on forward reasoning than backward reasoning. However, there were effects associated with the level of expertise in the way the processes of forward and backward reasoning are used, with the expert and intermediate valuers being more thorough and comprehensive in their reasoning process than the novices.

Research limitations/implications

This study explores the possibility that forward and backward reasoning play an important role in commercial valuation problem solving using a limited sample of valuers. Given this, data cannot be generalised to all valuation practice settings but may motivate future research that examines the effectiveness of forward and backward reasoning in diverse valuation practice settings and develops a holistic model of valuation reasoning.

Practical implications

The findings of this study are applicable to valuation practice. Future training efforts need to evaluate the usefulness of teaching problem solving and explicitly recognise forward and backward reasoning, along with other problem-solving strategies uncovered in this study, as standard training strategies for influencing the quality of valuation decisions.

Originality/value

By adopting VPA, this study employs an insightful and rich dataset which allows an interpretation of thoughts of valuers into cognitive reasoning strategies that provide a deeper level of understanding of how valuers solve valuation problem; this has not been possible in previous related valuation studies.

Details

Property Management, vol. 37 no. 5
Type: Research Article
ISSN: 0263-7472

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Article
Publication date: 6 October 2020

Peter Palm and Magnus Andersson

The purpose of this study is to evaluate the impact of theoretical knowledge related to financial behaviour and especially anchor effects.

Abstract

Purpose

The purpose of this study is to evaluate the impact of theoretical knowledge related to financial behaviour and especially anchor effects.

Design/methodology/approach

The study design is based upon an experiment divided into two parts, before and after the development of the course curriculum for the course introducing behavioural finance for undergraduate real estate students.

Findings

The study concludes that the anchor effect is persistent also after introducing theoretical knowledge regarding financial behaviour and anchor effects. To conclude the results, in this study, indicates that the appraisal of properties are dependent on the individual’s cognitive capacity to mitigate anchor effects. There are epistemological assumptions underlying the belief in the individuals’ capacity to handle anchor effects that might provide biased appraisals. These assumptions need to be carefully tested and treated to increase the accuracy of property appraisals.

Practical implications

The study result also highlights the possibility that current literature in valuation, and learning activities, does not emphases and stimulate readers to critical thinking. This paper would, therefore, propose also other real estate education programmes to be aware of the potential lack of critical thinking among the students.

Originality/value

It provides an insight regarding how appraisal of properties is dependent on the individual’s cognitive capacity to mitigate anchor effects.

Details

Journal of European Real Estate Research , vol. 14 no. 2
Type: Research Article
ISSN: 1753-9269

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Article
Publication date: 10 July 2018

Abdul-Rasheed Amidu and David Boyd

The purpose of this paper is to identify the core dimensions of problem solving of experts in commercial valuation in order to provide a rich stimulus for managing current…

Abstract

Purpose

The purpose of this paper is to identify the core dimensions of problem solving of experts in commercial valuation in order to provide a rich stimulus for managing current practice and enabling future development.

Design/methodology/approach

The study adopted a cognitive position but emphasised understanding the everyday commercial property valuation practice in a naturalistic context and from the participants’ perspectives. Given this, a grounded theory approach was employed as a research strategy to guide the data collection and surface theoretical interpretations. Data were obtained through in-depth interviews with practicing valuers working in private real estate firms within metropolitan Birmingham, UK.

Findings

The interviews uncover four dimensions of experts’ problem-solving practice in commercial valuation: multidimensional, domain-specific knowledge base; cognitive process that is centred on analysis and reflection; collaborative problem-solving venture with colleagues; and professional practice issues awareness. A conceptual model is proposed which integrates these dimensions enabling a clearer understanding of the nature of valuation work.

Research limitations/implications

This study was designed to be descriptive and theory generating, thus, the findings cannot be generalised as the sample was confined to one city and consists of a small number of senior practicing valuers. Therefore, the findings may not be fully applicable to other practicing valuers, other geographical locations or more widely to other types of property valuation. Nevertheless, the findings provide an important cognitive framework which can be verified by other researchers seeking to examine the practice of expert valuers.

Practical implications

The identification of the core dimensions of expert problem solving in commercial property valuation is shown to have implications for valuation practice, education and continued research. The valuation practice environments need to develop mechanisms to provide time that would enable these multi-dimensions of professional competence to be developed. Further work is needed to expand and refine the model across expert practice in other specialty areas of valuation practice.

Originality/value

This study expands the current understanding of valuation process to areas of expertise that have received less coverage in behavioural valuation literature, that is, the central role of knowledge and cognition and how these are integrated for effective valuation problem solving and decision making.

Details

Journal of Property Investment & Finance, vol. 36 no. 4
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 9 October 2020

Brano Glumac and François Des Rosiers

Automated valuation models have been in use at least for the last 50 years in both academia and practice, while automated valuation recently re-emerged as very important…

Abstract

Purpose

Automated valuation models have been in use at least for the last 50 years in both academia and practice, while automated valuation recently re-emerged as very important with the rise of digital infrastructure. The current state of the art, therefore, justifies the dual contributions of this paper: organising existing knowledge and providing a new framework.

Design/methodology/approach

This paper provides much-needed analysis and synthesis of the accumulated body of knowledge by proposing an updated classification of automated valuation approaches based on two criteria, and a taxonomy adapted to new trends. The latter requires a paradigm shift from models to automated valuation systems. Both classification and taxonomy arose after literature review.

Findings

This paper provides a framework for an explicit context under which automated valuation is carried out. To do so, authors propose a definition of automation valuation systems; contextualise the differences among theories, approaches, methods, models and systems present in automated valuation and introduce a classification of automated valuation approaches and a non-hierarchical taxonomy of automated valuation systems.

Research limitations/implications

Perhaps, a systematic literature review process instead of a selective list of 100 references could additionally validate the proposed classification and taxonomy.

Practical implications

The new framework, underlying various dimensions of the automated valuation process, can help practitioners surpass judging models based purely on their predictive accuracy. Also, the automated valuation system is a more generic term that can better accommodate future research coming from a multitude of disciplines, more diverse business areas and enlarged variety of practical users.

Originality/value

This is the first paper that develops a taxonomy of automated valuation systems.

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Article
Publication date: 22 August 2018

Frank Kwakutse Ametefe, Steven Devaney and Simon Andrew Stevenson

The purpose of this paper is to establish an optimum mix of liquid, publicly traded assets that may be added to a real estate portfolio, such as those held by open-ended…

Abstract

Purpose

The purpose of this paper is to establish an optimum mix of liquid, publicly traded assets that may be added to a real estate portfolio, such as those held by open-ended funds, to provide the liquidity required by institutional investors, such as UK defined contribution pension funds. This is with the objective of securing liquidity while not unduly compromising the risk-return characteristics of the underlying asset class. This paper considers the best mix of liquid assets at different thresholds for a liquid asset allocation, with the performance then evaluated against that of a direct real estate benchmark index.

Design/methodology/approach

The authors employ a mean-tracking error optimisation approach in determining the optimal combination of liquid assets that can be added to a real estate fund portfolio. The returns of the optimised portfolios are compared to the returns for portfolios that employ the use of either cash or listed real estate alone as a liquidity buffer. Multivariate generalised autoregressive models are used along with rolling correlations and tracking errors to gauge the effectiveness of the various portfolios in tracking the performance of the benchmark index.

Findings

The results indicate that applying formal optimisation techniques leads to a considerable improvement in the ability of the returns from blended real estate portfolios to track the underlying real estate market. This is the case at a number of different thresholds for the liquid asset allocation and in cases where a minimum return requirement is imposed.

Practical implications

The results suggest that real estate fund managers can realise the liquidity benefits of incorporating publicly traded assets into their portfolios without sacrificing the ability to deliver real estate-like returns. However, in order to do so, a wider range of liquid assets must be considered, not just cash.

Originality/value

Despite their importance in the real estate investment industry, comparatively few studies have examined the structure and operation of open-ended real estate funds. To the authors’ knowledge, this is the first study to analyse the optimal composition of liquid assets within blended or hybrid real estate portfolios.

Details

Journal of Property Investment & Finance, vol. 37 no. 1
Type: Research Article
ISSN: 1463-578X

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Book part
Publication date: 1 January 2000

Witold J. Henisz and Andrew Delios

Cross-national variation in institutional environments adds uncertainty to foreign operations, which in turn affects international strategy decisions such as when to enter…

Abstract

Cross-national variation in institutional environments adds uncertainty to foreign operations, which in turn affects international strategy decisions such as when to enter a market, the entry mode used if entering, as well as the performance of foreign entries. Although all firms are exposed to the influence of a host country's institutional environment, firms exhibit differential responses to this influence based on resident knowledge and capabilities. Managers in a multinational firm must therefore work to align their strategies with both the hazards and opportunities they face in a given institutional environment, as well as with the firm-specific knowledge and capabilities at their disposal. Rather than taking institutions as an immutable constraint when making decisions, a firm can cultivate and exploit its ability to successfully manage diverse institutional hazards in its host country environments.

Details

The New Institutionalism in Strategic Management
Type: Book
ISBN: 978-1-84950-164-4

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Article
Publication date: 5 June 2017

Jesse Saginor and Yue Ge

The purpose of this research is to analyze a county’s housing market over 23 years to determine what impact, if any, multiple hurricanes have had on the residential real…

Abstract

Purpose

The purpose of this research is to analyze a county’s housing market over 23 years to determine what impact, if any, multiple hurricanes have had on the residential real estate market.

Design/methodology/approach

This research uses a hedonic price model to determine the impacts that multiple hurricanes had on housing values.

Findings

There was a significant and negative countywide impact on housing sales values in the 1996, which can directly be attributed to three hurricanes impacting Brunswick County. Economic factors, rather than hurricanes and related storms, are more likely to impact sales values in all other years.

Research limitations/implications

This research is limited only to single-family home sales in Brunswick County, North Carolina, from 1984 to 2007. The model does not include multi-family residential uses.

Practical implications

Unlike many other areas that have been studied regarding natural disasters, Brunswick County has been hit multiple times by hurricanes and related storms, providing some insight into the long-term implications of the impact of storms on housing values over an extended period of time. The practical implication is that despite the likelihood of hurricanes and proximity to the ocean, people are willing to pay to live in coastal areas, even an area with a history of repeated direct and indirect strikes by hurricanes.

Originality/value

Unlike much of the peer-reviewed research that looks at a single occurrence of a natural disaster, this research looks at the impacts of multiple hurricanes on a single county over 23 years to determine what impact, if any, these storms have on the overall housing market.

Details

International Journal of Housing Markets and Analysis, vol. 10 no. 3
Type: Research Article
ISSN: 1753-8270

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