Impact of Housing Policy Uncertainty on Herding Behavior: Evidence from UK's Regional Housing Markets

Geoffrey Ngene and Rangan Gupta
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Geoffrey Ngene: Stetson-Hatcher School of Business (SHSB), Mercer University, 1501 Mercer University Drive, Macon, GA 32107, USA

No 202115, Working Papers from University of Pretoria, Department of Economics

Abstract: This study investigates the impact of housing policy uncertainty on the herding behavior in the UK's regional housing markets. Using a sample of thirteen regional housing markets and quarterly data from 1973Q4 to 2019Q2, we find that the probability of herding behavior is increasing in policy uncertainty in nine of the thirteen regions and the national housing market. However, London and the Outer Metro regions, which have a high presence of institutional investors and high population, exhibit decreasing probability of herding as policy uncertainty increases. We attribute this to the presence of informed investors and low asset value uncertainty. Therefore, since herding amplify market volatility, instability, fragility and asset mispricing, policy makers need to minimize policy uncertainties and implement regulatory mechanisms such as circuit breakers to circumvent the policy information risk from inducing non-information and irrational herding behavior among the investors.

Keywords: Herding; Regional Housing Markets; Housing Policy Uncertainty; United Kingdom (search for similar items in EconPapers)
JEL-codes: C32 G11 G14 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2021-02
New Economics Papers: this item is included in nep-cwa and nep-ure
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Citations: View citations in EconPapers (1)

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