Mean Reversion in Asia-Pacific Stock Prices: New Evidence from Quantile Unit Root Tests

We investigate the stationarity of real stock prices among 12 Asia-Pacific countries over the period 1991–2018. The methodology employed is driven by the need to address three key concerns: (i) the identification of which positive or negative shocks are linked to 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 the data within a quantile unit root testing framework. Our results generally indicate that real stock prices are stationary at the upper quantiles only. There is also evidence of a varied speed of adjustment process across the quantiles where stationarity is present. Further analysis indicates that real stock prices became much more reverting and with a faster speed of adjustment after the global financial crisis, except for Japan and New Zealand.