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


  • Chen, Shu-Ling
  • Kim, Hyeongwoo


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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  • Chen, Shu-Ling & Kim, Hyeongwoo, 2008. "Nonlinear Mean Reversion across National Stock Markets: Evidence from Emerging Asian Markets," MPRA Paper 18680, University Library of Munich, Germany, revised Nov 2009.
  • Handle: RePEc:pra:mprapa:18680

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    References listed on IDEAS

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    Cited by:

    1. Wang, Juan & Zhang, Dongxiang & Zhang, Jian, 2015. "Mean reversion in stock prices of seven Asian stock markets: Unit root test and stationary test with Fourier functions," International Review of Economics & Finance, Elsevier, vol. 37(C), pages 157-164.
    2. Kim, Hyeongwoo & Ryu, Deockhyun, 2015. "Measuring the speed of convergence of stock prices: A nonparametric and nonlinear approach," Economic Modelling, Elsevier, vol. 51(C), pages 227-241.
    3. Guglielmo Maria Caporale & Luis A. Gil-Alana & Kefei You, 2017. "Global and Regional Financial Integration in Emerging Asia: Evidence from Stock Markets," Discussion Papers of DIW Berlin 1668, DIW Berlin, German Institute for Economic Research.
    4. Buckley, Winston S. & Long, Hongwei, 2015. "A discontinuous mispricing model under asymmetric information," European Journal of Operational Research, Elsevier, vol. 243(3), pages 944-955.

    More about this item


    Linear Unit Root Test; Nonlinear Unit Root Test; Nonlinear Panel Unit Root Test; International Relative Stock Prices;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)


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