Impact of volatility and equity market uncertainty on herd behaviour: Evidence from UK REITs

Omokolade Akinsomi, Yener Coskun, Rangan Gupta, Chi Keung Lau

Research output: Contribution to journalArticlepeer-review

21 Citations (Scopus)


This paper examines herding behaviour among investors in UK-listed Real Estate Investment Trusts (REITs) within three market regimes (low, high and extreme volatility periods) from the period June 2004 to April 2016.
Observations of investors in 36 REITs that trade on the London Stock Exchange as at April 2016 were used to analyse herding behaviour among investors of shares of UK REITs, employing a Markov regime-switching model.
Although a static herding model rejects the existence of herding in REITs markets, estimates of the regime-switching model reveal substantial evidence of herding behaviour within the low volatility regime. Most interestingly, we observed a shift from anti-herding behaviour within the high volatility regime to herding behaviour within the low volatility regime, with this having been caused by the FTSE 100 Volatility Index (UK VIX).
The results have various implications for decisions concerning asset allocation, diversification and value management within UK REITs. Market participants and analysts may take into account that collective movements and market sentiment/psychology are determinative factors of risk-return of UK REITs. In addition, general uncertainty in the equity market, proxied by the impact of the UK VIX, may also provide a signal for increasing herding-related risks within UK REITs.
Original languageEnglish
Pages (from-to)169-186
Number of pages18
JournalJournal of European Real Estate Research
Issue number2
Publication statusPublished - 26 Jul 2018
Externally publishedYes


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