Mean reversion and long memory in African stock market prices

Emmanuel Anoruo and Luis Gil-Alana

No 01/2011, NCID Working Papers from Navarra Center for International Development, University of Navarra

Abstract: We examine the behaviour of stockmarket prices in several African countries by means of fractionally integrated techniques. In doung so, we can test for mean reversion in these markets. Our results can be summarized as follows: we cannot find evidence of mean reversion in any single market, and evidence of long memory returns (i.e.,orders of integration above 1 in the logged stock prices) is obtained in the cases of Egypt and Nigeria, and, in a lesser extent in Tunisia, Morocco and Kenya. Permittin theexistence of a s structural change, the breakdates take place in the earlier 2000s in the majority of the cases, and evidenceof mena reversio seems to have taken place in hte periods before the breaks in most of the countries. If we focus on the absolute and squared returns, evidence of long memory is obtained in Nigeria and Egypt. Thus, for these two countries, a long memory model incorporating positive fractional degrees of integration in both the level and the volatility process should be considered.

Keywords: long memory; fraction integration; stock market returns (search for similar items in EconPapers)
JEL-codes: C4 F3 G15 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2010-05
References: Add references at CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Mean reversion and long memory in African stock market prices (2011)
Working Paper: Mean reversion and long memory in African stock market prices (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:nva:unnvaa:wp01-2010

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