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Are BRICS Stock Market Indices Mean Reverting? Evidence Based on Expected Lifetime Range Ratio

Author

Listed:
  • Mukta Kanvinde

    (IFMR Graduate School of Business- Krea University, India)

  • Muneer Shaik

    (IFMR Graduate School of Business- Krea University, India)

Abstract

We use the Expected Lifetime Range (ELR) Ratio proposed in Shaik and Maheswaran (2018) to find evidence of mean reversion in the BRICS stock markets indices. We divide the sample period into pre-crisis, crisis, and post-subprime crisis data sets. We find that the BRICS stock market indices show mean reversion from 2001 to 2018. While before the subprime crisis, the indices followed a random walk, after the subprime crisis, the BRICS stock markets show mean reversion behavior and have become more predictable. We also conduct the Lo and Mackinlay variance Ratio test and find that the Expected Lifetime Range Ratio is better at detecting the presence of mean reversion.

Suggested Citation

  • Mukta Kanvinde & Muneer Shaik, 2020. "Are BRICS Stock Market Indices Mean Reverting? Evidence Based on Expected Lifetime Range Ratio," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 19(2), pages 169-186, September.
    • Handle: RePEc:ijb:journl:v:19:y:2020:i:2:p:169-186
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Mean Reversion; BRICS; Lo and Mackinlay Variance Ratio; Subprime Crisis; Expected Lifetime Range ratio;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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