Frame Independence and the Property Professionals

Over the last half a century, capital market theory has developed to help investors and their advisers to quantify risk. Traditional capital market theories, such as Capital Asset Pricing Model (CAPM), have been based on the premise that investors act rationally. In terms of the definition of rationality, existing studies suggest that rational people would behave consistently and coherently under different circumstances or their behaviours do not relevant to frames, i.e. the form used to describe a decision question (Shefrin 2002). However, psychologists have identified that individualís choices often stray from rational decisions and can, therefore, be inconsistent under different situations (Tversky & Kahneman 1981). In an effort to understand individualsí decision making processes especially under different circumstances of uncertainty, several descriptive models, such as the prospect theory, have been introduced. Based on a research study using the same type of questions presented in Kahneman & Tversky (1979), questionnaires for this paper were sent out to property professionals in both China and the UK in 2005. With a relatively high response rate, this study was able to investigate the level of frame dependence among property professionals in both countries, and further identify whether there was any significant difference between experiences in an emerging market as opposed to a mature market context. The paper also examines factors that might cause such effects if they exist. The findings from this paper thus may help to provide a better understanding of property professionalsí decision making processes in both China and the UK.