Mean Reversion on Global Stock Markets

Wolfgang Drobetz and Patrick Wegmann

Swiss Journal of Economics and Statistics (SJES), 2002, vol. 138, issue III, 215-239

Abstract: This paper focuses on mean reversion on international stock markets and explores whether this empirical observation is compatible with a rational, general equilibrium asset pricing model. We consider a simple time series model with switching regimes for the consumption process in the G-7 countries and compare the simulated returns with historical stock market data. Our results show that for most countries the empirical mean reversion produces no challenge for an equilibrium model. Short-run momentum, however, cannot be explained within the same simple framework.

Keywords: Asset Pricing; Mean Reversion; Variance Ratios; Regime Switching; Monte Carlo Simulation (search for similar items in EconPapers)
JEL-codes: E21 E32 G12 G14 G15 (search for similar items in EconPapers)
Date: 2002
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sjes.ch/papers/2002-III-1.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ses:arsjes:2002-iii-1

Access Statistics for this article

Swiss Journal of Economics and Statistics (SJES) is currently edited by Marius Brülhart

More articles in Swiss Journal of Economics and Statistics (SJES) from Swiss Society of Economics and Statistics (SSES) Contact information at EDIRC.
Bibliographic data for series maintained by Kurt Schmidheiny ().