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Estimating the mean-reverting component in stock prices : a cross-country comparison

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Gallagher, Liam A., Sarno, Lucio and Taylor, Mark P. (1997) Estimating the mean-reverting component in stock prices : a cross-country comparison. Scottish Journal of Political Economy, 44 (5). pp. 566-582. doi:10.1111/1467-9485.00075

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Official URL: http://dx.doi.org/10.1111/1467-9485.00075

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Abstract

This paper investigates the mean-reverting component in real stock prices for sixteen countries using a Kalman filter maximum likelihood estimation procedure to measure the transitory, permanent and seasonal components. Evidence is provided supporting the mean-reversion hypothesis that stock prices are not pure random walks: a statistically significant mean reverting component is found in each country's stock prices. Nevertheless, for twelve of the sixteen countries the transitory component does not explain more than 5% of the variation in stock prices.

Item Type: Journal Article
Divisions: Faculty of Social Sciences > Warwick Business School
Journal or Publication Title: Scottish Journal of Political Economy
Publisher: Wiley-Blackwell Publishing Ltd.
ISSN: 0036-9292
Official Date: 1997
Dates:
DateEvent
1997Published
Volume: 44
Number: 5
Page Range: pp. 566-582
DOI: 10.1111/1467-9485.00075
Status: Peer Reviewed
Publication Status: Published
Access rights to Published version: Restricted or Subscription Access

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