The Use of Heuristics within the Valuation Profession in Kenya

Abstract

The use of heuristics is common within the valuation profession in Kenya, mainly because of the country’s valuation environment characterised by limited information. Although heuristics can be useful when assessing market value in imperfect markets, their inappropriate use can contribute to valuation inaccuracies. There is limited research on the effects of heuristics on the valuation industry in developing countries, with no comprehensive study in Kenya. The study’s main objective is to establish the positive and negative effects of anchoring and adjustment heuristic on the valuation profession in Kenya while identifying the significant types of heuristics within the industry. The study used a quantitative research design involving a survey of registered and practicing valuers in Kenya. Findings indicate the presence of anchoring and adjustment heuristic and that valuers adopt this type of heuristic to solve information problems while improving valuation accuracy. Further, the study found that inappropriate use of anchoring and adjustment heuristic contributes to valuation inaccuracies; it is the second most prevalent after positivity heuristic. The study contributes to knowledge as it builds on the existing literature by providing additional empirical support on the effects of heuristics on the valuation profession while recommending appropriate measures to improve the profession.