Mean Reversion in Stock markets: Band-TAR Model

• Main Authors: LIU,HSIN-TZU, 劉欣姿
• Other Authors: CHEN,CHUNCHIH
• Format: Others
• Language: zh-TW
• Published: 2008
• Online Access: http://ndltd.ncl.edu.tw/handle/96363961517460562303

碩士 === 國立臺北大學 === 經濟學系 === 96 === Detecting mean reversion is in order to evidence market inefficiency. Many studies about mean reversion are in terms of Summers’ (1986) idea－stock price is composed of random walk and stationary components. They suggest that mean reversion is due to contrarian investment strategy while stock price’s overreaction temporarily. However, they don’t import transaction cost and bands of inaction for mean reversion. This article applies the Band-TAR model by Obstfeld and Taylor(1997) to study mean reversion in stock markets over the 1971-2007 period －including Taiwan, Korea, Singapore, Hong Kong, United States, Japan, Thailand. Using Band-TAR model, we can find mean reversion and bands of inaction in Taiwan, Korea, Singapore, and Thailand. This result isn’t found in AR (1) model. Further study for predictability of stock price, we compare Band-TAR, AR (1) and Random walk without draft model in predictive accuracy. The in-sample period is 1971 to 1999 and out-of-sample period is 2000 to 2007. We utilize “Modified Diebold-Mariano test” by Harvey,Leybourne and Newbold (1997) and “nested model test” by Clark and West (2006).