Working Papers, Department of Economics, Lund University
Are the Nordic Stock Markets Mean Reverting?
Abstract: In this paper we test for mean reversion in the Nordic
stock markets using monthly nominal data 1947-1998. By simply account for
the heteroscedasticity of the data with a regime-switching model of normal
distributions and taking estimation bias into account via a Bayesian
approach we can find no support of mean reversion. This is a contradiction
to some previous result from Denmark and Sweden. Our findings suggest that
mixtures of two regimes can characterize the each stock market and within
the regimes the stock market is random. This finding of randomness is in
line with recent evidence in literature.
Keywords: market efficiency; variance ratio; Gibbs sampling; hidden Markov chains; MCMC; (follow links to similar papers)
JEL-Codes: C11; C15; G10; (follow links to similar papers)
26 pages, August 30, 2001
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