MEAN REVERSION IN THE SPANISH STOCK MARKET PRICES USING FRACTIONALLY INTEGRATED SEMIPARAMETRIC TECHNIQUES

Javier Depenya and Luis Gil-Alana
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Javier Depenya: University of Navarre, Faculty of Economics, Edificio Biblioteca, Entrada Este, E-31080 Pamplona, Spain

International Journal of Theoretical and Applied Finance (IJTAF), 2002, vol. 05, issue 06, 645-657

Abstract: In this article we examine the mean-reverting property in the Spanish stock market prices by means of looking at its order of integration. We use several semiparametric procedures proposed by P. M. Robinson in a number of papers. The results show that, though the unit root hypothesis cannot be rejected in the log of the stock prices, the estimated order of integration in the first differenced series, (i.e. in the stock market returns), is slightly below zero, implying that there exists a small degree of mean reversion in the behaviour of prices.

Keywords: Stock market returns; long memory; semiparametric estimation (search for similar items in EconPapers)
Date: 2002
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DOI: 10.1142/S021902490200164X

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