Document Type

Journal Article

Department/Unit

Department of Economics

Abstract

We develop some properties on the autocorrelation of the k-period returns for the general mean reversion (GMR) process in which the stationary component is not restricted to the AR(1) process but takes the form of a general ARMA process. We then derive some properties of the GMR process and three new nonparametric tests comparing the relative variability of returns over different horizons to validate the GMR process as an alternative to random walk. We further examine the asymptotic properties of these tests which can then be applied to identify random walk models from the GMR processes.

Keywords

mean reversion, variance ratio test, random walk, stock price, stock return

Publication Date

2006

Source Publication Title

Journal of Applied Mathematics and Decision Sciences

Volume

2006

Start Page

1

End Page

21

Publisher

Hindawi

Peer Reviewed

1

Copyright

Creative Commons Attribution License

DOI

10.1155/JAMDS/2006/12314

Link to Publisher's Edition

http://dx.doi.org/10.1155/JAMDS/2006/12314

ISSN (print)

20903359

Included in

Economics Commons

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