Chapter 101: Indices Herding Behavior and Its Impact on Listed Real Estate and Two Other Asset Classes: A Case of Developed versus Emerging Markets

The literature on indices herding behavior among bonds, equities, and real estate is very scant. When one compares developed and emerging markets, specifically the United States, the United Kingdom, Taiwan, and South Africa, such studies are hard to find. This study uses principal component analysis to extract and illustrate parameters driving herding investment behavior for the indices of the mentioned countries. Thereafter, the vector autoregressive model is used for robustness tests. The results reveal the following: First, governmental relationships and similarities among countries influenced herding behavior in the selected capital markets indices. Second, most of the herding occurs in the bond indices for the four countries. Finally, the robustness results reveal spillover opportunities in between and across countries irrespective of the index analyzed. The results are generalizable as they are consistent with prior studies such as Zaremba et al. (2021).