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Analysis of Herding in REITs of an Emerging Market: The Case of Turkey

Author

Listed:
  • Omokolade Akinsomi

    (School of Construction Economics and Management, University of Witwatersrand, Johannesburg, South Africa)

  • Yener Coskun

    (Capital Markets Board of Turkey)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Pretoria and IPAG Business School, Paris, France)

Abstract

The study examines herding behavior in Turkish REITs (T-REITs) by using daily closing prices over the period of July 2007 to May 2016. To the best of our knowledge, this paper is the first study to solely examine the herding behavior in T-REITs by utilizing Chang et al. (2000) methodology. For the three sub-periods, our results indicate herding behaviors, the presence of directional asymmetry and linear relation between volatility and herding. The evidences suggest herding is a persistent phenomenon and increases during the period of market stress. Finally, we also find transitivity in volatility periods in both with/without asymmetry term models. The research draws critical implications for portfolio managers and supervisors dealing with emerging markets and T-REITs.

Suggested Citation

  • Omokolade Akinsomi & Yener Coskun & Rangan Gupta, 2016. "Analysis of Herding in REITs of an Emerging Market: The Case of Turkey," Working Papers 201666, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:201666
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    References listed on IDEAS

    as
    1. Chang, Eric C. & Cheng, Joseph W. & Khorana, Ajay, 2000. "An examination of herd behavior in equity markets: An international perspective," Journal of Banking & Finance, Elsevier, vol. 24(10), pages 1651-1679, October.
    2. Giacomo Morri & Alessandro Baccarin, 2016. "European REITs NAV discount: do investors believe in property appraisal?," Journal of Property Investment & Finance, Emerald Group Publishing Limited, vol. 34(4), pages 347-374, July.
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    4. Yener Coskun & Unal Seven & H. Murat Ertugrul & Ali Alp, 2020. "Housing price dynamics and bubble risk: the case of Turkey," Housing Studies, Taylor & Francis Journals, vol. 35(1), pages 50-86, January.
    5. Yao, Juan & Ma, Chuanchan & He, William Peng, 2014. "Investor herding behaviour of Chinese stock market," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 12-29.
    6. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22.
    7. Philippas, Nikolaos & Economou, Fotini & Babalos, Vassilios & Kostakis, Alexandros, 2013. "Herding behavior in REITs: Novel tests and the role of financial crisis," International Review of Financial Analysis, Elsevier, vol. 29(C), pages 166-174.
    8. Jian Zhou & Randy Anderson, 2013. "An Empirical Investigation of Herding Behavior in the U.S. REIT Market," The Journal of Real Estate Finance and Economics, Springer, vol. 47(1), pages 83-108, July.
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    10. Mr. Sunil Sharma & Sushil Bikhchandani, 2000. "Herd Behavior in Financial Markets: A Review," IMF Working Papers 2000/048, International Monetary Fund.
    11. Chiang, Thomas C. & Zheng, Dazhi, 2010. "An empirical analysis of herd behavior in global stock markets," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1911-1921, August.
    12. Vassilios Babalos & Mehmet Balcilar & Rangan Gupta, 2014. "Revisiting Herding Behavior in REITs: A Regime-Switching Approach," Working Papers 201448, University of Pretoria, Department of Economics.
    13. Russ Wermers, 1999. "Mutual Fund Herding and the Impact on Stock Prices," Journal of Finance, American Finance Association, vol. 54(2), pages 581-622, April.
    14. Balcilar, Mehmet & Demirer, Rıza & Hammoudeh, Shawkat, 2014. "What drives herding in oil-rich, developing stock markets? Relative roles of own volatility and global factors," The North American Journal of Economics and Finance, Elsevier, vol. 29(C), pages 418-440.
    15. Natividad Blasco & Pilar Corredor & Sandra Ferreruela, 2012. "Does herding affect volatility? Implications for the Spanish stock market," Quantitative Finance, Taylor & Francis Journals, vol. 12(2), pages 311-327, July.
    16. Balcilar, Mehmet & Demirer, Rıza & Hammoudeh, Shawkat, 2013. "Investor herds and regime-switching: Evidence from Gulf Arab stock markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 23(C), pages 295-321.
    17. Rhea Tingyu Zhou & Rose Neng Lai, 2008. "Herding and positive feedback trading on property stocks," Journal of Property Investment & Finance, Emerald Group Publishing Limited, vol. 26(2), pages 110-131, March.
    18. M. Nihat Solakoglu & Nazmi Demir, 2014. "Sentimental herding in Borsa Istanbul: informed versus uninformed," Applied Economics Letters, Taylor & Francis Journals, vol. 21(14), pages 965-968, September.
    19. Mehmet Balcilar & Riza Demirer, 2015. "Effect of Global Shocks and Volatility on Herd Behavior in an Emerging Market: Evidence from Borsa Istanbul," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 51(1), pages 140-159, January.
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    Citations

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    Cited by:

    1. Esin Cakan & Riza Demirer & Rangan Gupta & Josine Uwilingiye, 2019. "Economic Policy Uncertainty and Herding Behavior Evidence from the South African Housing Market," Advances in Decision Sciences, Asia University, Taiwan, vol. 23(1), pages 88-113, March.
    2. Omokolade Akinsomi & Yener Coskun & Rangan Gupta & Chi Keung Marco Lau, 2016. "Impact of Volatility and Equity Market Uncertainty on Herd Behavior: Evidence from UK REITs," Working Papers 201688, University of Pretoria, Department of Economics.
    3. Yener Coskun & Isil Erol & Giacomo Morri, 2021. "Why do Turkish REITs trade at discount to net asset value?," Empirical Economics, Springer, vol. 60(5), pages 2227-2259, May.
    4. Yener Cos‚kun & A. Sevtap Selcuk-Kestel & Bilgi Yilmaz, 2017. "Diversification benefit and return performance of REITs using CAPM and Fama-French: Evidence from Turkey," Borsa Istanbul Review, Research and Business Development Department, Borsa Istanbul, vol. 17(4), pages 199-215, December.

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    More about this item

    Keywords

    REIT; herd behavior; asymmetric herding; volatility; Turkey;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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