Impact of Volatility and Equity Market Uncertainty on Herd Behavior: Evidence from UK REITs

Akinsomi, Omokolade, Coskun, Yener, Gupta, Rangan and Lau, Chi Keung Marco. (2016). Impact of Volatility and Equity Market Uncertainty on Herd Behavior: Evidence from UK REITs, Working Paper. No. 2016-88. December 28. University of Pretoria.

15 Pages Posted: 1 Jan 2017

See all articles by Omokolade Akinsomi

Omokolade Akinsomi

University of the Witwatersrand

Yener Coskun

Capital Markets Board of Turkey

Rangan Gupta

University of Pretoria - Department of Economics

Chi Keung Lau

University of Huddersfield

Date Written: December 28, 2016

Abstract

Employing static/dynamic models that capture herding under different market regimes, we provide novel evidence on the herding behaviour of UK-listed Real Estate Investment Trusts (REITs). Our sample is extensive and covers the period from 30/6/2004 to 5/4/2016. Estimates of herding behaviour are derived using a Markov regime switching model. The analysis suggests 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 regimes switching model reveal substantial evidence of herding behaviours under the low volatility regime. Most interestingly we observe a shift from anti-herding behaviour during high volatility regimes to herding behaviour under low volatility regime, with this caused by the UK VIX.

Suggested Citation

Akinsomi, Omokolade and Coskun, Yener and Gupta, Rangan and Lau, Chi Keung, Impact of Volatility and Equity Market Uncertainty on Herd Behavior: Evidence from UK REITs (December 28, 2016). Akinsomi, Omokolade, Coskun, Yener, Gupta, Rangan and Lau, Chi Keung Marco. (2016). Impact of Volatility and Equity Market Uncertainty on Herd Behavior: Evidence from UK REITs, Working Paper. No. 2016-88. December 28. University of Pretoria., Available at SSRN: https://ssrn.com/abstract=2891586 or http://dx.doi.org/10.2139/ssrn.2891586

Omokolade Akinsomi (Contact Author)

University of the Witwatersrand ( email )

1 Jan Smuts Avenue
Johannesburg, GA Gauteng 2000
South Africa

Yener Coskun

Capital Markets Board of Turkey ( email )

Eskisehir Yolu 8. km No:156
Ankara, 06530
Turkey

HOME PAGE: http://ankara.academia.edu/yenercoskun

Rangan Gupta

University of Pretoria - Department of Economics ( email )

Lynnwood Road
Hillcrest
Pretoria, 0002
South Africa

Chi Keung Lau

University of Huddersfield ( email )

Queensgate
Huddersfield HD1 3DH
United Kingdom

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