Are the Nordic Stock Markets Mean Reverting?
In this paper we test for mean reversion in the Nordic stock markets using monthly nominal data 1947-1998. By simply account for the heteroscedasticity of the data with a regime-switching model of normal distributions and taking estimation bias into account via a Bayesian approach we can find no support of mean reversion. This is a contradiction to some previous result from Denmark and Sweden. Our findings suggest that mixtures of two regimes can characterize the each stock market and within the regimes the stock market is random. This finding of randomness is in line with recent evidence in literature.
|Date of creation:||30 Aug 2001|
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