The Lens of Green Focus: Herding Behavior in the U.S. REITs Market

Under the influence of growing media coverage, more investors are jumping into the green investment bandwagon, driven by the fear of missing out on opportunities aligned with shifting social preferences. This study examines investor herding behavior in the U.S. REITs market and its association with the growing awareness of sustainable investing. Using a time-varying cross-sectional absolute deviation (CSAD) model, we find that the herding effect varies over time, accumulating during slow market upturns, weakening during crises, and exhibiting some instances of anti-herding behavior. Our findings suggest that climate change concerns amplify the herding effect, while policy uncertainty diminishes it. Additionally, we observe a negative correlation between herding behavior and market volatility. The study explores the impact of volatility spikes in green assets on investor behavior, mitigating the herding effect and promoting positive social learning. These findings have policy implications and highlight the importance of green investment and climate concerns in advancing the sustainable development of REITs.