Traditional finance theory have developed on the basis of expected utility theory and assumes that investors are rational. However, recent developments in behavioural finance challenge this, and thus question the validity of the assumptions on which expected utility theory are based. However, existing studies on this matter have mainly focused on capital markets, and research in the property industry has tended to lag behind. Therefore, adopting UK property professionals as samples, this paper aims to explore the reliability of the invariance assumption of people's behaviour under expected utility theory.
To fulfil the aim of this paper, a questionnaire survey was undertaken among the property professionals in London during the second half of 2005. Benefited from the group administrative method 78 out of 99 questionnaires were returned, and this reflects an overall response rate of approximately 79 per cent.
The research identifies that among the tested UK samples, property professionals change their preferences according to the way the questions are presented. In other words, the invariance assumption is not valid among UK property professionals. This paper then further investigates the possible factors that might influence people's decisions. It suggests that people would change their choices anyway, regardless of their gender, age, degree subjects or their working experience in the property industry. Therefore, further research is needed to find some other factors that might influence this particular behaviour among UK property professionals.
This paper draws the industry attention to the use of existing investment models, and suggests that an understanding of people's behaviour could help to improve decision making.
