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
Date Written: December 28, 2016
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: Suggested Citation