Revisiting Herding Behavior in REITs: A RegimeSwitching Approach

Vassilios Babalos, Mehmet Balcilar, Rangan Gupta and Nikolaos Philippas
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Nikolaos Philippas: Department of Business Administration, University of Piraeus, Greece

No 15-15, Working Papers from Eastern Mediterranean University, Department of Economics

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). Our sample is extensive and covers the period from 2/1/2004 to 28/6/2013.Estimates of herding behavior are derived using a Markov regime-switching model. The preliminary analysis confirms the existence of three market regimes (low, high and extreme or crash volatility) with transition ordered as ‘low, high and crash volatility’. Although static herding model rejects the existence of herding in REITs markets estimates of the regimeswitching 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; Herding; REITs; regime-switching (search for similar items in EconPapers)
JEL-codes: C32 G11 G15 (search for similar items in EconPapers)
Pages: 32
Date: 2014
New Economics Papers: this item is included in nep-ger
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http://repec.economics.emu.edu.tr/RePEc/emu/wpaper/15-15.pdf First version, 2014 (application/pdf)

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Working Paper: Revisiting Herding Behavior in REITs: A Regime-Switching Approach (2014)
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