Stock Price Mean Reversion to Fundamentals and Long-Run Return Predictability in the Tunisian Stock Market

Boussaidi, Ramzi; Marouan, Kouki

doi:10.5539/ijbm.v10n8p183

Cited by 2 publications

(2 citation statements)

References 36 publications

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“…The inflation rate had a negative effect on stock market performance indicating that higher levels of inflation rate result in lower stock market indices in Kenya. Boussaidi and Kouki (2015) research results indicate that although stock prices diverge away from their fundamental value proxied by dividends or earnings, there is an error correction mechanism, which adjusts stock prices to revert back to their fundamental value. Evidence also shows that mean reversion supports the predictability of stock returns by the dividend to price and the price to earnings ratios.…”

Section: Methodsmentioning

confidence: 93%

Mean Reversion: An Investigation From Karachi Stock Exchange Sectors

Vveinhardt

Štreimikienė

Ahmed

et al. 2016

Technological and Economic Development of Economy

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This article analyses the sectors of Karachi stock exchange in order to determine if there is any presence of mean reversion phenomenon in the stock market sectors and also an attempt to determine the pace of mean reversion. To conduct this research, secondary data is collected from the State Bank Bulletin. The frequency of the data is monthly. The variables include the individual; the data was obtained from 24 sectors returns over the period of 17 years from January 1992 to June 2008. The GARCH (1, 1) model was used to find the outcomes and the effects. In the two sectors out of 24 sectors, the GARCH and ARCH effects were significant, namely, in the Jute and Banks & Investment Companies. We studied the mean reverting process in the KSE sectors over a specific time period. Since, the mean reversion varies over different time periods. Therefore, it would be a good area for future research to study the reasons, why the market reacts differently over different time periods and to determine the reasons for such variations. The paper contributes to Stock Prices returns and investment opportunities by studying the Mean Reversion Phenomenon.

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Section: Methodsmentioning

confidence: 93%

Mean Reversion: An Investigation From Karachi Stock Exchange Sectors

Vveinhardt

Štreimikienė

Ahmed

et al. 2016

Technological and Economic Development of Economy

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“…Thus, a variable is said to be exhibited mean reversion behavior, if it has the tendency to revert back to its long-term average value over the period. Therefore, referring exhibiting mean reversion synonymous with showing long-term average returns (e.g., Chaves, Viswanathan 2016;Boussaidi, Kouki 2015;Huggins, Schaller 2013;etc.). Similarly, Hillebrand (2003) explains mean reversion as changes in the market returns or prices following a direction that is exhibiting a reversion level, which is observed in reaction to previous changes made.…”

Section: Introductionmentioning

confidence: 99%

Speed of Mean Reversion: An Empirical Analysis of Kse, Lse and Ise Indices

Palwasha

Ahmad

Ahmed

et al. 2018

Technological and Economic Development of Economy

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Abstract. The purpose of this study is to determine the presence of mean reversion in the stock markets indices of Pakistan, moreover, to measure, and compare the speed of mean reversion of the stock markets indices across Pakistan. In order to carry out the research study, the daily data of three stock indices of Pakistan such as: KSE-100, LSE-25 and ISE-10 are collected from 2003 to 2014. After the application of tests such as ARCH and GARCH, it was found that returns series of KSE-100, LSE-25 and ISE-10 indices exhibit mean reversion, indicating that the returns revert back to their historical value after reaching an extreme value. Further, the mean reversion rate shows that KSE-100 index has the slowest mean reversion, however, the ISE-10 index has the fastest mean reversion among the three indices. Therefore, the results of the study concluded that KSE-100 index, due to the slowest mean reversion rate has higher volatility over a longer period of time. On the contrary, since, ISE-10 index has exhibited the fastest mean reversion with the lowest volatility as compared to others. But due to fast mean reversion rate, it will help investors to gain profits over a shorter period of time. Thus, it can be recommended that the investor willing to bear the risk of time and looking for long-term investment should invest in KSE-100 index. However, investors looking for higher profits in a shorter period can invest in the ISE-10 index but with higher risk-returns trade-off.

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Stock Price Mean Reversion to Fundamentals and Long-Run Return Predictability in the Tunisian Stock Market

Cited by 2 publications

References 36 publications

Mean Reversion: An Investigation From Karachi Stock Exchange Sectors

Mean Reversion: An Investigation From Karachi Stock Exchange Sectors

Speed of Mean Reversion: An Empirical Analysis of Kse, Lse and Ise Indices

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