Nonlinear mean reversion in stock prices : Evidence from Asian markets

Lim, Kian Ping and Liew, Venus Khim Sen (2007) Nonlinear mean reversion in stock prices : Evidence from Asian markets. Applied Financial Economics Letters, 3 (1). pp. 25-29. ISSN 1744-6546


Download (204kB) | Preview


Utilizing the standard linearity test of Luukkonen et al. (1988), the linear nature of all the Asian stock indices has been formally rejected. This finding warrants use of the nonlinear stationary test of Kapetanois et al. (2003), which is also constructed in the STAR framework, to investigate the mean reverting property of the stock prices series. As a whole, this study not only found convincing evidence of a nonlinear mean reverting pattern in all the Asian stock indices, but also demonstrates the risk of drawing the wrong inferences on mean reversion when the ADF test is applied to data governed by nonlinearity.

Item Type: Article
Uncontrolled Keywords: Stock prices, Asian markets
Subjects: H Social Sciences > HG Finance > HG1-9999 Finance > HG4501-6051 Investment, capital formation, speculation > HG4551-4598 Stock exchanges
Divisions: SCHOOL > Labuan School of International Business and Finance
Depositing User: ADMIN ADMIN
Date Deposited: 20 Mar 2012 15:30
Last Modified: 17 Oct 2017 11:39

Actions (login required)

View Item View Item