Mean Reversion in Stock Prices: New Evidence from Panel Unit Root Tests for Seventeen European Countries

Paresh Narayan () and Arti Prasad ()
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Arti Prasad: School of Economics, the University of the South Pacific

Economics Bulletin, 2007, vol. 3, issue 34, 1-6

Abstract: 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.

JEL-codes: C2 G0 (search for similar items in EconPapers)
Date: 2007-08-13
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Citations: View citations in EconPapers (19)

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