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Herding and positive feedback trading on property stocks

Rhea Tingyu Zhou (Department of Finance and Business Economics, Faculty of Business Administration, University of Macau, Taipa, Macao)
Rose Neng Lai (Department of Finance and Business Economics, Faculty of Business Administration, University of Macau, Taipa, Macao)

Journal of Property Investment & Finance

ISSN: 1463-578X

Article publication date: 7 March 2008




Motivated by the unique characteristics and profit generating nature of real estate investments, this paper aims to study if investors herd differently in corresponding securities versus other non‐real estate securities.


The authors choose the Hong Kong stock market to form the sample to distinguish the herd behavior of the property stocks, if any, from stocks of other categories. The authors separate stocks into two portfolios, those made up of property stocks versus non‐property stocks, because it is widely known that property stocks have high market volatility and domination of institutional investors.


The authors find a persistent and significant smaller herding in property stocks. The result of a reverse U‐shape intraday herding pattern also provides a possible clue to previous studies of a U‐shape in intraday volatility pattern. The authors document that recent announcements of an increase in the short‐term interest rate have an additive effect on the herd behavior of market participants in trading property stocks. Lastly, on the conjecture that herding will further exemplify price instability arising from positive feedback trading while investors engage in positive feedback trading in both property stocks and non‐property stocks, such activity in the latter group lasts for a longer period. Furthermore, price instability of property stocks disappears at a faster pace than the counterpart.


This study shows that property stocks are more efficiently traded by investors than other types of stocks, at least in the Hong Kong stock market.



Tingyu Zhou, R. and Neng Lai, R. (2008), "Herding and positive feedback trading on property stocks", Journal of Property Investment & Finance, Vol. 26 No. 2, pp. 110-131.



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Copyright © 2008, Emerald Group Publishing Limited

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