Understanding herding behavior in hospitality stocks

This study makes a novel contribution to the behavioral finance literature in hospitality by examining herding behavior in China’s hospitality stocks during the period of 2001–2022 using the nonlinear model of Chang et al. (2000) and State Space model. The results reveal robust and persistent herding across various stock segments, market conditions, periods, and portfolio sizes. Herding behavior is more pronounced in hotel stocks compared to tourism stocks, in hospitality stocks listed on the Shanghai Stock Exchange versus those listed on the Shenzhen Stock Exchange, and in hospitality stocks relative to the broader A-share market. Stronger herding is observed during down markets, particularly during crises. A 5–6 year herding cycle is identified, reflecting the cyclicality of both policy and the market. Larger portfolios demonstrate stronger herding during crises, while smaller portfolios exhibit more herding in non-crisis up-markets. These findings deepen our understanding of investor behavior in the hospitality sector and offer valuable insights into hospitality finance.