Mean reversion in Asia-Pacific stock prices: New evidence from quantile unit root tests

Issue Date

7-2021

Abstract

We investigate the stationarity of the daily real stock prices in 12 Asia-Pacific countries over the period 1991–2020. The methodology employed is driven by the need to address three key concerns: (i) the identification of association between the size of shocks and stationarity; (ii) the identification of different speeds of adjustment towards long-run equilibrium; and (iii) the identification of mean reversion and potential asymmetric speed of adjustment before and after the 2008–2009 global financial crisis. To meet these concerns, we examine the time series properties of high frequency data within a quantile unit root testing framework. Our results generally indicate that stock prices are stationary at the higher quantiles. There is also evidence of asymmetries in stock price dynamic adjustments at the upper quantiles, in which larger shocks are associated with faster mean reversion, and conversely, smaller shocks are associated with non-stationarity. Further analysis indicates that stock prices became much more mean reverting and with a faster speed of adjustment after the global financial crisis for all sample countries.

Source or Periodical Title

International Review of Economics & Finance

ISSN

10590560

Volume

73

Page

214-230

Document Type

Article

College

College of Economics and Management (CEM)

Physical Description

tables

Language

English

Subject

Mean reversion, Quantile unit root regression, Stock prices

Identifier

https://doi.org/10.1016/j.iref.2020.12.038

Digital Copy

Yes

Link to Full Text

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