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Herding in Investment Trusts: New Evidence Using Tick-by-Tick Data

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  • Karthik Natashekara

    (Indian Institute of Management)

Abstract

We study herding behaviour in Indian investment trusts, which comprise real estate investment trusts (REITs) and infrastructure investment trusts (InvITs), from July 2021 to March 2025. We employ two distinct methodologies: the high-frequency herding intensity statistic of Patterson and Sharma (2006), and a modified version of the return dispersion-based approach of Chang et al. (2000). The results provide clear evidence of herding in these markets, which is notable given that they have relatively less information asymmetry, volatility, and cash flow uncertainty than traditional equities. Noticeably, herding is absent before the reduction of the minimum trading lot size to one unit by the Indian regulatory body, the Securities and Exchange Board of India, in late 2021, which indicates the influence of increased retail participation. During COVID-19, herding was more pronounced in REITs than in InvITs, thus reflecting heightened uncertainty in the commercial real estate sector. These findings have broader implications for regulation, portfolio management, and market efficiency.

Suggested Citation

  • Karthik Natashekara, 2025. "Herding in Investment Trusts: New Evidence Using Tick-by-Tick Data," International Real Estate Review, Global Social Science Institute, vol. 28(3), pages 329-358.
    • Handle: RePEc:ire:issued:v:28:n:03:2025:p:329-358
    DOI: 10.53383/100406
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    References listed on IDEAS

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    1. Lakonishok, Josef & Shleifer, Andrei & Vishny, Robert W., 1992. "The impact of institutional trading on stock prices," Journal of Financial Economics, Elsevier, vol. 32(1), pages 23-43, August.
    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. Demirer, RIza & Kutan, Ali M., 2006. "Does herding behavior exist in Chinese stock markets?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 16(2), pages 123-142, April.
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