The current study explores the degree to which real estate investors rely on extrapolation to form expectations about future returns and risk and whether pricing is influenced by cognitive biases. A survey of Swiss institutional market participants elicits past portfolio returns and risk as well as expected values of return and risk over a one-year period. The data is employed to test the consistency of the relationship between expected risk and return. This test is based on simple relations between vacancy and growth rates in rent as well as on a new dynamic cap rate model derived from Campbell and Shiller’s (1988) dynamic DCF model. Preliminary results indicate that the bias caused by the affect heuristic is not present. One explanation, in line with research from the equity market, is that the lack of time pressure and the increased level of financial literacy impede the affect heuristic from occurring.