Revisiting Herding Behavior in REITs: A Regime-Switching Approach
Mehmet Balcilar and
No 201448, Working Papers from University of Pretoria, Department of Economics
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 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; Herding; REITs; regime-switching (search for similar items in EconPapers)
JEL-codes: C32 G11 G15 (search for similar items in EconPapers)
Pages: 29 pages
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Working Paper: Revisiting Herding Behavior in REITs: A RegimeSwitching Approach (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:201448
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