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Revisiting Herding Behavior in REITs: A RegimeSwitching Approach

Listed author(s):
  • Vassilios Babalos

    ()

    (Technological Educational Institute of Peloponnese and University of Piraeus)

  • Mehmet Balcilar

    ()

    (Department of Economics, Eastern Mediterranean University, Famagusta, Northern Cyprus , via Mersin 10, Turkey; Department of Economics, University of Pretoria, Pretoria, 0002, South Africa)

  • Rangan Gupta

    ()

    (Department of Economics, University of Pretoria, Pretoria, South Africa)

  • Nikolaos Philippas

    ()

    (Department of Business Administration, University of Piraeus, Greece)

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). Our sample is extensive and covers the period from 2/1/2004 to 28/6/2013.Estimates of herding behavior are derived using a Markov regime-switching model. The preliminary analysis confirms 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 regimeswitching 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.

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File URL: http://repec.economics.emu.edu.tr/RePEc/emu/wpaper/15-15.pdf
File Function: First version, 2014
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Paper provided by Eastern Mediterranean University, Department of Economics in its series Working Papers with number 15-15.

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Length: 32
Date of creation: 2014
Handle: RePEc:emu:wpaper:15-15.pdf
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Web page: http://economics.emu.edu.tr/

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