Are stock returns still mean‐reverting?

This study uses a powerful nonparametric block bootstrap method and fresh data to examine the unresolved issue of mean reversion in stock returns. The results show that both large and small company stocks experienced significant mean reversion in returns for periods of 1 through 5 years during 1926–...

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Bibliographic Details
Published inReview of financial economics Vol. 20; no. 1; pp. 22 - 27
Main Author Mukherji, Sandip
Format Journal Article
LanguageEnglish
Published New Orleans Elsevier 01.01.2011
Elsevier Science Ltd
SeriesReview of Financial Economics
Subjects
Block bootstrap
Bootstrap method
G11
G12
Mean reversion
Mean reversion Stock returns Block bootstrap
Rates of return
Size of enterprise
Stock prices
Stock returns
Studies
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Summary:This study uses a powerful nonparametric block bootstrap method and fresh data to examine the unresolved issue of mean reversion in stock returns. The results show that both large and small company stocks experienced significant mean reversion in returns for periods of 1 through 5 years during 1926–1966. In 1967–2007, there was significant mean reversion in 5‐year returns of large company stocks, and 1‐, 4‐, and 5‐year returns of small company stocks. The findings indicate that, although mean reversion in stock returns has weakened in recent decades, it persists, particularly for small company stocks.
ISSN:1058-3300
1873-5924
DOI:10.1016/j.rfe.2010.08.001