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Nonlinear Mean Reversion across National Stock Markets: Evidence from Emerging Asian Markets

Listed author(s):
  • Shu-Ling Chen
  • Hyeongwoo Kim

This paper seeks empirical evidence of nonlinear mean-reversion in relative national stock price indices for Emerging Asian countries. It is well known that conventional linear unit root tests suffer from low power against the stationary nonlinear alternative. Implementing the nonlinear unit root tests proposed by Kapetanios et al. (2003) and Cerrato et al. (2009) for the relative stock prices of Emerging Asian markets, we find strong evidence of nonlinear mean reversion, whereas linear tests fail to reject the unit root null for most cases. We also report some evidence that stock markets in China and Taiwan are highly localized.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/10168737.2011.580569
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Article provided by Taylor & Francis Journals in its journal International Economic Journal.

Volume (Year): 25 (2011)
Issue (Month): 2 ()
Pages: 239-250

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Handle: RePEc:taf:intecj:v:25:y:2011:i:2:p:239-250
DOI: 10.1080/10168737.2011.580569
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  10. Mario Cerrato & Christian de Peretti & Nick Sarantis, 2008. "A Nonlinear Panel Unit Root Test under Cross Section Dependence," Working Papers 2008_08, Business School - Economics, University of Glasgow.
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