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Herding behavior in real estate markets: Novel evidence from a Markov-switching model

Vassilios Babalos, Mehmet Balcilar and Rangan Gupta

Journal of Behavioral and Experimental Finance, 2015, vol. 8, issue C, 40-43

Abstract: Employing a dynamic model that captures herding under different market regimes we provide novel evidence on the herding behavior of US-listed Real Estate Investment Trusts (REITs). Estimates of herding behavior are derived using a Markov regime-switching model. Although static herding model rejects the existence of herding in REITs markets estimates of the regime-switching model reveal substantial evidence of herding behavior under the crash regime for almost all sectors. Most interestingly we observe a shift from negative herding behavior during low and high volatility regimes to positive herding behavior under crash regime for almost all REITs sectors.

Keywords: Cross sectional dispersion; Market stress; Herding; REITs; Regime switching (search for similar items in EconPapers)
JEL-codes: C G11 G15 (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1016/j.jbef.2015.10.004

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