Mean Reversion in Stock Prices: New Evidence from Panel Unit Root Tests for Seventeen European Countries
نویسندگان
چکیده
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. I would like to thank David Rapach for making available the GAUSS codes for the panel unit root tests used in this paper. The codes were modified to conduct the empirical analysis in this paper. Citation: Narayan, Paresh and Arti Prasad, (2007) "Mean Reversion in Stock Prices: New Evidence from Panel Unit Root Tests for Seventeen European Countries." Economics Bulletin, Vol. 3, No. 34 pp. 1-6 Submitted: December 31, 2006. Accepted: August 13, 2007. URL: http://economicsbulletin.vanderbilt.edu/2007/volume3/EB-06C20083A.pdf
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