Dynamic mean reversion of stock prices : evidence from Amman stock exchange
Other Title(s)
الارتداد الديناميكي لأسعار الأسهم نحو الوسط : دليل من بورصة عمان للأوراق المالية
Author
Source
Jordan Journal of Economic Sciences
Issue
Vol. 5, Issue 1 (30 Jun. 2018), pp.57-65, 9 p.
Publisher
The University of Jordan Deanship of Scientific Research (DSR)
Publication Date
2018-06-30
Country of Publication
Jordan
No. of Pages
9
Main Subjects
Financial and Accounting Sciences
Topics
Abstract EN
This study aims to investigate the relative mean reversion process of stock prices in Amman stock exchange using daily data over the period (2004-2013).
Symmetric and asymmetric versions of the partial adjustment model are utilized to achieve the objectives of the study.
The simple model of mean reversion, which is commonly used to estimate the speed of mean reversion, is extended to a single equation Error Correction model (ECM), which accounts for both short and long term effects.
The results show that stock prices significantly but very slowly move toward their fundamental values.
The adjustment rate is 9% indicating that 7 days are required to eliminate half of the deviation of the actual stock price from the fundamental value.
The asymmetric partial adjustment model shows that the adjustment coefficient is higher for prices above their fundamental values (31%) than for prices below their fundamental values (15%), thus the stock prices are slower when the adjustment requires an increase in price level than a decrease in price level.
Finally, the ECM shows that stock prices change their actual values relative to the long-run fundamental value but in a slow manner
American Psychological Association (APA)
al-Rabadi, Dima Walid Hanna. 2018. Dynamic mean reversion of stock prices : evidence from Amman stock exchange. Jordan Journal of Economic Sciences،Vol. 5, no. 1, pp.57-65.
https://search.emarefa.net/detail/BIM-905418
Modern Language Association (MLA)
al-Rabadi, Dima Walid Hanna. Dynamic mean reversion of stock prices : evidence from Amman stock exchange. Jordan Journal of Economic Sciences Vol. 5, no. 1 (2018), pp.57-65.
https://search.emarefa.net/detail/BIM-905418
American Medical Association (AMA)
al-Rabadi, Dima Walid Hanna. Dynamic mean reversion of stock prices : evidence from Amman stock exchange. Jordan Journal of Economic Sciences. 2018. Vol. 5, no. 1, pp.57-65.
https://search.emarefa.net/detail/BIM-905418
Data Type
Journal Articles
Language
English
Notes
Record ID
BIM-905418