On the Non-Equilibrium Density of Geometric Mean Reversion
6 Pages Posted: 21 Jan 2008 Last revised: 14 Apr 2008
Geometric mean reversion plays a fundamental role in economic dynamic models. While it is known, at least since Merton (1975) , that the equilibrium distribution of geometric mean reversion is a Gamma distribution, an explicit expression for the non-equilibrium distribution has not been known. In this article we compute the probability density function of X(t) where X(·) represents a general geometric mean reversion process.
Keywords: Geometric mean reversion, non-equilibrium analysis, economic dynamics, econometrics
JEL Classification: C16, C63, E22, G31
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