Social and Behavioral Sciences Commons^™

Mean Reverting Behavior Of Stock Returns: Evidence From A Panel Of Asian And Pacific Basin Countries, Abdur Chowdhury

Abdur R. Chowdhury

This study uses the seemingly-unrelated regression method in panel data to test for the mean-reversion behavior in stock returns in eight Asian and Pacific Basin markets: Hong Kong, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan, and Thailand. The empirical evidence suggests that an investor cannot use the information contained in stock performances in precious periods to consistently earn abnormal profits. A fundamental implication of the efficient market theory is that successive security returns are serially independent. Hence the empirical evidence is consistent with the spirit of the efficiency market theory. This would suggest a hands-off approach for the policy-makers with regard …