Time-Varying and Spatial Herding Behavior in the U.S. Housing Market: Evidence from Direct Housing Prices

Posted: 31 Mar 2017

See all articles by Geoffrey Ngene

Geoffrey Ngene

Mercer University - Eugene W. Stetson School of Business and Economics

Daniel Sohn

Independent

M. Kabir Hassan

University of New Orleans - College of Business Administration - Department of Economics and Finance

Date Written: March 30, 2017

Abstract

This paper investigates herding behavior in the US residential housing market. The sample period is 1975M01 to 2015M06. The study utilizes the housing price index of each of the 50 states and Washington DC to form nine census region-based markets, or portfolios and then employs switching and quantile regressions to examine the spatial and time-varying disparities of housing return dispersions and investors' herding behavior. The study find that the degree of herding varies across regimes, regions and conditional distributions. The regime-specific herd formation may be partially originated by extreme housing market conditions, bull and bear housing market conditions, uncertainty in national financial markets, economic recessions and uncertainty of economic policies. The bull housing market exhibits stronger effects on return dispersion than down markets, which is consistent with the "flight-to-safety" consenus behavior of investors. The study also finds that positive and negative linear and nonlinear returns magnify dispersions in an asymmetric manner. The increase in co-movement and interdependence of state and regional-level housing markets returns among geographically diverse states and regions offer little hope of successful geographical portfolio diversification strategies for U.S. housing market investors. Moreover, time-invariant modeling may yield incorrect inferences regarding herd formation in regional housing markets.

Keywords: Herding; CSAD; Housing market; Regimes; Switching regression

JEL Classification: G14, G15

Suggested Citation

Ngene, Geoffrey and Sohn, Daniel and Hassan, M. Kabir, Time-Varying and Spatial Herding Behavior in the U.S. Housing Market: Evidence from Direct Housing Prices (March 30, 2017). Journal of Real Estate Finance and Economics, Vol. 54, No. 4, 2017, Available at SSRN: https://ssrn.com/abstract=2943554

Geoffrey Ngene (Contact Author)

Mercer University - Eugene W. Stetson School of Business and Economics ( email )

1400 Coleman Av
Macon, GA 31207
United States

Daniel Sohn

Independent ( email )

M. Kabir Hassan

University of New Orleans - College of Business Administration - Department of Economics and Finance ( email )

2000 Lakeshore Drive
New Orleans, LA 70148
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
559
PlumX Metrics