Long-run Cointegration and Market Equilibrium in Large Cap Stocks

Huaibing Yu

Journal of Finance and Investment Analysis, 2019, vol. 8, issue 1, 2

Abstract: Although stock returns are thought to be stationary and showing mean-reverting behaviors, stock price levels don’t have to follow this manner. This paper finds that the general market condition has a commanding power on stock price level movements which are non-stationary individually but with statistically significant long-run cointegration relationships within sub-groups of large cap stocks in the U.S. market. Moreover, the vector error-correction models provide significant evidences that the short-run stock price level movements can be very volatile and show a reluctant behavior of returning to the long-run equilibrium. However, the estimated and the predicted cointegration parameters provide statistical evidences that the long-run equilibrium relationships are solid and stationary over time.JEL classification numbers: G12; G14; G17Keywords: Cointegration, Market Equilibrium, Stock Price Level

Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.scienpress.com/Upload/JFIA%2fVol%208_1_2.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:spt:fininv:v:8:y:2019:i:1:f:8_1_2

Access Statistics for this article

More articles in Journal of Finance and Investment Analysis from SCIENPRESS Ltd
Bibliographic data for series maintained by Eleftherios Spyromitros-Xioufis ().