Drawing Inferences From Statistics Based on Multi-Year Asset Returns / Matthew Richardson, James H. Stock.

By:

Richardson, Matthew

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w3335.Publication details: Cambridge, Mass. National Bureau of Economic Research 1990.Description: 1 online resource: illustrations (black and white)Subject(s):

C - Mathematical and Quantitative Methods

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Abstract: The possibility of mean reversion in stock prices recently has been examined using statistics based on multi-year returns. Previous researchers have noted difficulties in drawing inferences about these statistics because of poor performance of the usual approximating asymptotic distributions. We therefore develop an alternative asymptotic distribution theory for statistics involving multi-year returns. These distributions differ markedly from those implied by the conventional theory. This alternative theory provides substantially better approximations to the relevant finite-sample distributions. It also leads to empirical inferences much less at odds with the hypothesis of no mean reversion.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w3335 (Browse shelf(Opens below))	Not For Loan

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April 1990.

The possibility of mean reversion in stock prices recently has been examined using statistics based on multi-year returns. Previous researchers have noted difficulties in drawing inferences about these statistics because of poor performance of the usual approximating asymptotic distributions. We therefore develop an alternative asymptotic distribution theory for statistics involving multi-year returns. These distributions differ markedly from those implied by the conventional theory. This alternative theory provides substantially better approximations to the relevant finite-sample distributions. It also leads to empirical inferences much less at odds with the hypothesis of no mean reversion.