Asymmetric Mean Reversion in Low Liquid Markets: Evidence from BRVM

Nathaniel Gbenro and Richard Kouamé Moussa
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Nathaniel Gbenro: Department of Economics, (Thema) University Cergy-Pontoise, 95011 Cergy-Pontoise, France
Richard Kouamé Moussa: Ecole Nationale Supérieure de Statistique et d’Economie Appliquée, Abidjan 08, Côte d’Ivoire

JRFM, 2019, vol. 12, issue 1, 1-19

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: stock market efficiency; mean reversion; half-life; asymmetry; rolling regression (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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