Are BRICS Stock Market Indices Mean Reverting? Evidence Based on Expected Lifetime Range Ratio

Mukta Kanvinde and Muneer Shaik
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Mukta Kanvinde: IFMR Graduate School of Business- Krea University, India
Muneer Shaik: IFMR Graduate School of Business- Krea University, India

International Journal of Business and Economics, 2020, vol. 19, issue 2, 169-186

Abstract: We use the Expected Lifetime Range (ELR) Ratio proposed in Shaik and Maheswaran (2018) to find evidence of mean reversion in the BRICS stock markets indices. We divide the sample period into pre-crisis, crisis, and post-subprime crisis data sets. We find that the BRICS stock market indices show mean reversion from 2001 to 2018. While before the subprime crisis, the indices followed a random walk, after the subprime crisis, the BRICS stock markets show mean reversion behavior and have become more predictable. We also conduct the Lo and Mackinlay variance Ratio test and find that the Expected Lifetime Range Ratio is better at detecting the presence of mean reversion.

Keywords: Mean Reversion; BRICS; Lo and Mackinlay Variance Ratio; Subprime Crisis; Expected Lifetime Range ratio (search for similar items in EconPapers)
JEL-codes: C58 G10 G12 G14 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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