The Effect of Geographical Diversification Towards Property Investment Decisions in Indonesia

Anastasia, Njo and CHRESTELLA, THERESIA (2021) The Effect of Geographical Diversification Towards Property Investment Decisions in Indonesia. International Journal of Finance, Insurance and Risk Management, 11 (1). pp. 78-95. ISSN 2047-0916

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Abstract

Purpose: This study aims to explore the effects of financial knowledge, possible return, risk preference, and geographical attribute towards property investment decisions. Design/methodology/approach: Data was collected through online questionnaires, from which 148 investors were gathered, with the criteria of having property investments in different regions. Data were then analyzed using SmartPLS. Findings: Analysis results showed that financial knowledge, possible return, and geographical attribute significantly affect property investment decisions, but risk preference does not. This study will benefit property investors by showing that creating an investment portfolio in the property sector will help in increasing returns and reducing risks. Investing requires careful consideration as property is a high-risk investment product; hence, by having a property portfolio with geographical diversification, risks are reduced. Practical implications: Property investment is one of the investment options with high risk. Nonetheless, it still attracts investors, as they have more than one property to increase their wealth through their investment portfolio. The present study gives new insights for an effective investment portfolio. Originality value: Most previous studies on property investment decisions have been done before with the variable of financial knowledge, possible return, and risk preference. However, this study develops geographical attribute used as variables related to an investment portfolio in property, where said variable is seldom used in studies on property investment decisions.

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