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Mean reversion in stock prices: New evidence from panel unit root tests for seventeen European countries

journal contribution
posted on 2007-08-13, 00:00 authored by Paresh Narayan, A Prasad
There is a large and growing literature that investigates evidence for mean reversion in stock prices. Empirically, there is no consensus as to whether stock prices are mean reverting or random walk processes; at best, the results are mixed. In this paper, we provide further evidence on the mean reversion hypothesis for seventeen European countries using the Levin and Lin (1992), seemingly unrelated regression and the multivariate augmented Dickey-Fuller panel unit root tests. Our main finding is that stock prices of all seventeen European countries are characterised by a unit root, consistent with the efficient market hypothesis.

History

Journal

Economics Bulletin

Volume

3

Issue

34

Publisher

Economics Bulletin

eISSN

1545-2921

Language

eng

Publication classification

CN.1 Other journal article

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