Impact of Volatility and Equity Market Uncertainty on Herd Behavior: Evidence from UK REITs

Omokolade Akinsomi, Yener Coskun (), Rangan Gupta and Chi Keung Lau

No 201688, Working Papers from University of Pretoria, Department of Economics

Abstract: Employing static and dynamic models that capture herding under different market regimes, we provide novel evidence on the herding behaviour of UK-listed Real Estate Investment Trusts (REITs). Our sample is extensive and covers the period from 30/6/2004 to 5/4/2016. Estimates of herding behaviour are derived using a Markov regime-switching model. The analysis suggests 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 regimes switching model reveal substantial evidence of herding behaviours under the low volatility regime. Most interestingly we observe a shift from anti-herding behaviour during high volatility regimes to herding behaviour under low volatility regime, with this caused by the UK VIX.

Keywords: Herd behavior; UK REITs; Markov-switching; Time-varying probabilities (search for similar items in EconPapers)
JEL-codes: C32 G11 G15 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2016-12
New Economics Papers: this item is included in nep-fmk and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: Impact of Volatility and Equity Market Uncertainty on Herd Behaviour: Evidence from UK REITs (2018)
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