Asymmetric Mean Reversion in Low Liquid Markets: Evidence from BRVM

Nathaniel Gbenro () and Richard Kouamé Moussa
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Nathaniel Gbenro: ENSEA - Ecole nationale supérieure de statistique et d'économie appliquée [Abidjan], UCP - Université de Cergy Pontoise - Université Paris-Seine
Richard Kouamé Moussa: ENSEA - Ecole nationale supérieure de statistique et d'économie appliquée [Abidjan]

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Abstract: This paper analyzes the mean reversion property on the west African stock market (in French, Bourse Régionale des Valeurs Mobilières BRVM). For this purpose, we use two daily indices: (i) the composite index (BRVMC) and (ii) the index of the 10 most liquid assets (BRVM10) collected from 3 January 2005 to 29 June 2018. We estimate an asymmetric nonlinear autoregressive model with an EGARCH innovation to account for heteroskedasticity. The results suggest the existence of a mean reversion property for both indices. The half-life time is 7 days for the composite index and 2 days for the BRVM 10 index. Furthermore, using a rolling regression technique, we show that the estimated half-life time declines slightly for the composite index.

Keywords: rolling regression; asymmetry; mean reversion; half-life; stock market efficiency (search for similar items in EconPapers)
Date: 2019-03-06
Note: View the original document on HAL open archive server: https://hal.science/hal-02059799
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Citations: View citations in EconPapers (3)

Published in Journal of Risk and Financial Management, 2019, Financial Time Series: Methods & Models), 12 (1), ⟨10.3390/jrfm12010038⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02059799

DOI: 10.3390/jrfm12010038

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