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Asymmetric Mean Reversion in Low Liquid Markets: Evidence from BRVM

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  • Nathaniel Gbenro

    (Department of Economics, (Thema) University Cergy-Pontoise, 95011 Cergy-Pontoise, France
    Ecole Nationale Supérieure de Statistique et d’Economie Appliquée, Abidjan 08, Côte d’Ivoire)

  • Richard Kouamé Moussa

    (Ecole Nationale Supérieure de Statistique et d’Economie Appliquée, Abidjan 08, Côte d’Ivoire)

Abstract

This paper analyzes the mean reversion property on the west African stock market (in French, Bourse Régionale des Valeurs Mobilières BRVM). For this purpose, we use two daily indices: (i) the composite index (BRVMC) and (ii) the index of the 10 most liquid assets (BRVM10) collected from 3 January 2005 to 29 June 2018. We estimate an asymmetric nonlinear autoregressive model with an EGARCH innovation to account for heteroskedasticity. The results suggest the existence of a mean reversion property for both indices. The half-life time is 7 days for the composite index and 2 days for the BRVM 10 index. Furthermore, using a rolling regression technique, we show that the estimated half-life time declines slightly for the composite index.

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  • Nathaniel Gbenro & Richard Kouamé Moussa, 2019. "Asymmetric Mean Reversion in Low Liquid Markets: Evidence from BRVM," JRFM, MDPI, vol. 12(1), pages 1-19, March.
    • Handle: RePEc:gam:jjrfmx:v:12:y:2019:i:1:p:38-:d:211599
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    2. Massimiliano Caporin & Giuseppe Storti, 2020. "Financial Time Series: Methods and Models," JRFM, MDPI, vol. 13(5), pages 1-3, April.

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