Do U.S. stock prices exhibit mean reversion? Evidence from recent nonlinear unit root tests

Research output: Contribution to journalArticle

Abstract

This research paper extends the empirical literature on the stochastic properties of U.S. stock prices by applying nonlinear unit root tests developed recently by Kapetanios, Shin and Snell (2003) to statistically ascertain whether U.S. stock prices are non-stationary or non-linear and globally stationary. We analyze three U.S. stock price series over the period 1971.Q1-2009.Q4, and our results indicate that stock prices are non-stationary which supports the weak form of the efficient market hypothesis for the overall U.S. equity market. Policy implications of these findings are discussed.

Original languageEnglish
Pages (from-to)46-49
Number of pages4
JournalInternational Research Journal of Finance and Economics
Volume68
StatePublished - May 2011

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Mean reversion
Stock prices
Unit root tests
Policy implications
Efficient market hypothesis
Equity markets

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics
  • Finance

Cite this

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abstract = "This research paper extends the empirical literature on the stochastic properties of U.S. stock prices by applying nonlinear unit root tests developed recently by Kapetanios, Shin and Snell (2003) to statistically ascertain whether U.S. stock prices are non-stationary or non-linear and globally stationary. We analyze three U.S. stock price series over the period 1971.Q1-2009.Q4, and our results indicate that stock prices are non-stationary which supports the weak form of the efficient market hypothesis for the overall U.S. equity market. Policy implications of these findings are discussed.",
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