Abstract

https://ssrn.com/abstract=447205
 
 

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Citations (69)



 


 



Mean Reversion in Equilibrium Asset Prices


Stephen G. Cecchetti


Brandeis International Business School; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Pok-sang Lam


Ohio State University (OSU) - Economics

Nelson C. Mark


University of Notre Dame - Department of Economics and Econometrics; National Bureau of Economic Research (NBER)

November 1988

NBER Working Paper No. w2762

Abstract:     
Recent empirical studies have found that stock returns contain substantial negative serial correlation at long horizons. We examine this finding with a series of Monte Carlo simulations in order to demonstrate that it is consistent with an equilibrium model of asset pricing. When investors display only a moderate degree of risk aversion, commonly used measures of mean reversion in stock prices calculated from actual returns data nearly always lie within a 60 percent confidence interval of the median of the Monte Carlo distributions. From this evidence, we conclude that the degree of serial correlation in the data could plausibly have been generated by our model.

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Date posted: June 16, 2004  

Suggested Citation

Cecchetti, Stephen G. and Lam, Pok-sang and Mark, Nelson C., Mean Reversion in Equilibrium Asset Prices (November 1988). NBER Working Paper No. w2762. Available at SSRN: https://ssrn.com/abstract=447205

Contact Information

Stephen G. Cecchetti (Contact Author)
Brandeis International Business School ( email )
415 South Street
Waltham, MA 02453
United States
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
212-720-8629 (Phone)
212-720-2630 (Fax)
Centre for Economic Policy Research (CEPR) ( email )
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Pok-sang Lam
Ohio State University (OSU) - Economics ( email )
410 Arps Hall
1945 N. High St.
Columbus, OH 43210-1172
United States
Nelson Chung Mark
University of Notre Dame - Department of Economics and Econometrics ( email )
442 Flanner
Notre Dame, IN 46556
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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