Long Term Mean Reversion of Stock Prices Based on Fractional Integration

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In this study we examine the long term behavior of stock returns. The analysis reveals that negative autocorrelations of the returns exist for a super-long horizon as long as 10 years. This pattern, however, contrasts to predictions of previous stock price models which include random walks. We suggest the introduction of a fractionally integrated process into a nonstationary component of stock prices, and demonstrate empirically the existence of the process in NYSE stock returns. The predicted values of autocorrelation from our stock price model confirm the super-long term behavior of the returns observed in regression, indicating that inefficiency in the stock market could remain for a long time.
Publisher
한국경영과학회
Issue Date
2011-11
Language
Korean
Citation

MSFE, v.17, no.2, pp.85 - 97

ISSN
2287-2043
URI
http://hdl.handle.net/10203/103663
Appears in Collection
MT-Journal Papers(저널논문)
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