Anchor effects in appraisals: do information and theoretical knowledge matter?

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.

Citation

Palm, P. and Andersson, M. (2021), "Anchor effects in appraisals: do information and theoretical knowledge matter?", Journal of European Real Estate Research, Vol. 14 No. 2, pp. 246-260. https://doi.org/10.1108/JERER-03-2020-0012