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

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  • Babalos, Vassilios
  • Balcilar, Mehmet
  • Gupta, Rangan

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.

Suggested Citation

  • Babalos, Vassilios & Balcilar, Mehmet & Gupta, Rangan, 2015. "Herding behavior in real estate markets: Novel evidence from a Markov-switching model," Journal of Behavioral and Experimental Finance, Elsevier, vol. 8(C), pages 40-43.
    • Handle: RePEc:eee:beexfi:v:8:y:2015:i:c:p:40-43
    DOI: 10.1016/j.jbef.2015.10.004
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    More about this item

    Keywords

    Cross sectional dispersion; Market stress; Herding; REITs; Regime switching;
    All these keywords.

    JEL classification:

    • C - Mathematical and Quantitative Methods
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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