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Herding Behavior among Residential Developers

Author

Listed:
  • SeungHan Ro

    (Konkuk University)

  • Paul Gallimore

    (University of Reading)

  • Sherwood Clements

    (University of Alabama)

  • Gang-Zhi Fan

    (Guangzhou University)

Abstract

We investigate whether US real estate developers display herding in their building permit seeking behavior. We measure herding over the period 1988 through 2011 by applying to permit issuances measures previously used in studies of stock herding. We find evidence of herding at levels comparable to those found in studies involving common-stock trading. Developer herding is also stronger in up markets, than in down markets. This is consistent with up market buoyancy constraining the availability of reliable, independent information, which reinforces the tendency to follow the behavior of others.

Suggested Citation

  • SeungHan Ro & Paul Gallimore & Sherwood Clements & Gang-Zhi Fan, 2019. "Herding Behavior among Residential Developers," The Journal of Real Estate Finance and Economics, Springer, vol. 59(2), pages 272-294, August.
    • Handle: RePEc:kap:jrefec:v:59:y:2019:i:2:d:10.1007_s11146-018-9675-y
    DOI: 10.1007/s11146-018-9675-y
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    2. Akshita Singh & Shailendra Kumar & Utkarsh Goel & Amar Johri, 2023. "Behavioural biases in real estate investment: a literature review and future research agenda," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-17, December.
    3. Shikong Luo & Alan Tidwell & Sherwood Clements, 2022. "Does Political Uncertainty Affect Residential Development?," The Journal of Real Estate Finance and Economics, Springer, vol. 65(4), pages 572-592, November.
    4. Stanley Iat Meng Ko & Rose Neng Lai & Zhenjiang Qin, 2023. "Social Network Matters: Capital Structure Risk Control on REITs," The Journal of Real Estate Finance and Economics, Springer, vol. 66(3), pages 709-742, April.

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