On the Non-Equilibrium Density of Geometric Mean Reversion

6 Pages Posted: 21 Jan 2008 Last revised: 14 Apr 2008

See all articles by Zhaojun Yang

Zhaojun Yang

Southern University of Science and Technology - Department of Finance

Christian-Oliver Ewald

University of Glasgow; Høgskole i Innlandet

Abstract

Geometric mean reversion plays a fundamental role in economic dynamic models. While it is known, at least since Merton (1975) [9], 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

Suggested Citation

Yang, Zhaojun and Ewald, Christian-Oliver, On the Non-Equilibrium Density of Geometric Mean Reversion. Available at SSRN: https://ssrn.com/abstract=1085446 or http://dx.doi.org/10.2139/ssrn.1085446

Zhaojun Yang (Contact Author)

Southern University of Science and Technology - Department of Finance ( email )

No 1088, Xueyuan Rd.
District of Nanshan
Shenzhen, Guangdong 518055
China

HOME PAGE: http://faculty.sustc.edu.cn/profiles/yangzj

Christian-Oliver Ewald

University of Glasgow ( email )

Adam Smith Building
Glasgow, Scotland G12 8RT
United Kingdom

Høgskole i Innlandet ( email )

Lillehammer, 2624
Norway

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