Heuristic and Herding Bias on Property Investment Decision

Behavioral finance is the development of science which combines psychological and financial science. This studies the relation of emotional and cognitive deviation, thus affecting individual behavior. The decision made based on estimation that have been made, however was influenced by cognitive behavior associated to the
individual. The effect of cognitive causes investment decision that is made investors will be irrational as heuristic and herding behavior. Heuristic is a decision behavior based on information that they have. Herding is a behavior that imitate other persons, not by conviction or information that they holds. Therefore, the purpose of the research is to analyze whether heuristic-driven bias or herding behavior influences property investment decision. The sample study was 100 prospective investors or investors in Surabaya. This data is analyzed using SEM Partial Least Square (PLS). The results showed that heuristic behavior (representativeness, anchoring, gamblers fallacy, and availability bias) significantly influences the investment decision. On the other hand, overconfidence and herding did not significantly influence the investment decision.. Both bias heuristic and herding behavior more inclined to occur on men compare to women. While the representativeness, anchoring, overconfidence, gamblers fallacy and herding are dominated by experienced investors than inexperienced investors.