NDLI: Mean reversion in international markets: evidence from G.A.R.C.H. and half-life volatility models

Content Provider	Taylor & Francis Online
Author	Channar, Zahid Ali Ahmed, Rizwan Raheem Vveinhardt, Jolita Streimikiene, Dalia
Abstract	The objective of this research is to examine and compare the mean reversion phenomenon in developed and emerging stock markets. An important aim is to measure and compare the speed of mean reversion and half-life of volatility shocks of emerging and developed markets. For this purpose, we have selected five developed and seven emerging markets, and used daily market indices for the period of 1 January 2000 to 30 June 2016. We employed autoregressive conditional heteroskedasticity – Lagrange multiplier (A.R.C.H.-L.M.), generalised autoregressive conditional heteroskedasticity (G.A.R.C.H.) (1, 1), and half-life volatility shock techniques to carry out this research. The results of the study confirmed the mean-reverting process in developed and emerging markets. The South Korean market has the slowest mean reversion, and thus has the highest comparative volatility over a longer period of time. However, the Pakistan stock exchange exhibited the fastest mean reverting process. It is also concluded that the relative volatilities are higher in emerging markets, whereas the comparative volatilities are higher in developed markets. Therefore, it is further concluded that the mean reversion process is much faster in emerging indices except the South Korean and Chinese markets. The study recommends that if investors want higher returns in a shorter period of time then they should invest in emerging markets.
Starting Page	1198
Ending Page	1217
Page Count	20
File Format	PDF HTM / HTML
ISSN	1331677X 18489664
DOI	10.1080/1331677X.2018.1456358
Journal	Economic Research-Ekonomska Istraživanja
Volume Number	31
Issue Number	1
Language	English
Publisher	Routledge
Publisher Date	2018-05-22
Access Restriction	Open
Subject Keyword	Mean reversion Developed & emerging stock markets Half-life model A.R.C.H.-L.M. G.A.R.C.H. (1,1) C32 G12 G15
Content Type	Text
Resource Type	Article
Subject	Economics and Econometrics

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