Stationary Component in Stock Prices: A Reappraisal of Empirical Findings

@inproceedings{AlZoubi2015StationaryCI,
  title={Stationary Component in Stock Prices: A Reappraisal of Empirical Findings},
  author={Haitham A. Al-Zoubi and Aktham Issa Maghyereh},
  year={2015}
}
This paper re-examines the issue of mean reversion in stock prices by incorporating the structural break effect in the long horizon regression. Before adjusting for structural break, the paper finds that previous studies understate the evidence of mean-reversion. The understatement is mainly due to the clustering heteroskedasticity and autocorrelation in the overlapping returns. After adjusting for structural break(s), no evidence of predictability for value-weighted returns has been documented… CONTINUE READING