The impact of mean reversion model on portfolio investment strategies: Empirical evidence from emerging markets

Akarim, Yasemin Deniz; Sevim, Şerafettin

doi:10.1016/j.econmod.2012.11.028

Cited by 22 publications

(11 citation statements)

References 38 publications

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“…The reason why we choose these seven stock markets is that all these stock markets have been set up earlier than 1990 and a long sample period renders the results of our test more convincing. Akarim and Sevim (2013)has ever suggested that a mean reversion model is valid in the long run. Indonesia is excluded because it fails in the pre-test of LM Fourier unit root test below.…”

Section: Data and Summary Statisticsmentioning

confidence: 99%

“…If stock prices are mean reversion processes, then stocks are less risky for longer investment horizons so that more wealth may be allocated to stocks to get more returns. Finally, mean reversion in stock prices means a contrarian strategy, which consists of buying past losers or selling past winners (De Bondt & Thaler, 1985), is able to generate excess returns (Akarim & Sevim, 2013).…”

Section: Stationary Test With a Nonlinear Fourier Functionmentioning

confidence: 99%

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Mean reversion in stock prices of seven Asian stock markets: Unit root test and stationary test with Fourier functions

Juan

Zhang

2015

International Review of Economics & Finance

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Section: Data and Summary Statisticsmentioning

confidence: 99%

Section: Stationary Test With a Nonlinear Fourier Functionmentioning

confidence: 99%

Mean reversion in stock prices of seven Asian stock markets: Unit root test and stationary test with Fourier functions

Juan

Zhang

2015

International Review of Economics & Finance

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“…De Bondt & Thaler, 1985Richards, 1997;Balvers, Wu, & Gilliland, 2000, Chou, Chung, & Wei, 2007Akarim & Sevim, 2013), a negative return autocorrelation (e.g. Fama & French, 1988, Bali, Demirtas, & Levy, 2008Mukherji, 2011) and a cointegration relationship between the stock prices and their fundamental value (e.g.…”

Section: Introductionmentioning

confidence: 99%

An Empirical Essay to Explain the Contrarian Profits in the Tunisian Stock Market: Behavioral Approach vs. Rational Approach

Boussaidi¹

2015

IJEF

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This paper aims to investigate the behavioral and the rational explanations for the contrarian profits in the Tunisian stock market. We use the CAPM and the three-factor model of French (1993, 1996) to examine the rational explanations including the market risk, the size effect and the book to market effect. Behavioral explanations include the overconfidence bias and the investor sentiment. We use the decomposition of the trading volume advanced by Chuang and Lee (2006) to extract the factor reflecting the investor overconfidence and the ARMS index to measure the investor sentiment. These two variables are included in the three-factor model of French (1993, 1996) in an attempt to confront the rational approach with the behavioral approach. The results indicate that the contrarian profits on the Tunisian stock market are explained by the market risk, the size effect and the Book to Market effect; and that once adjusted for these three risk factors, they disappear. However, only the factor reflecting overconfidence among the two behavioral factors seems to play a role in explaining these abnormal returns.

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“…Using annual data of 18 international stock market indexes covering the period 1969-1996, they found a mean reversion justified by a significant reversal rate of 18.2% and 20.2% when the benchmark index is respectively the world and the stock index of the U.S. Recently, Akarim and Sevim (2013) replicated the methodology of Balvers et al (2000) to test the validity of the hypothesis of mean reversion of 18 emerging markets for the period 1995-2010. They found that this hypothesis is valid and that the speed of mean reversion varies between 30 and 38 months.…”

Section: Introductionmentioning

confidence: 70%

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

Boussaidi

Marouan

2015

IJBM

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The purpose of this paper is to examine the mean reversion hypothesis in the Tunisian stock market using two methods: We use a cointegration test technique between stock prices and fundamental value and we estimate the model of Chiang et al. (1995) developed to detect a potential mean reversion of stock prices to fundamental. Our 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.

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The impact of mean reversion model on portfolio investment strategies: Empirical evidence from emerging markets

Cited by 22 publications

References 38 publications

Mean reversion in stock prices of seven Asian stock markets: Unit root test and stationary test with Fourier functions

Mean reversion in stock prices of seven Asian stock markets: Unit root test and stationary test with Fourier functions

An Empirical Essay to Explain the Contrarian Profits in the Tunisian Stock Market: Behavioral Approach vs. Rational Approach

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

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