Journal of Economics and Finance

, Volume 35, Issue 3, pp 296–308

Mean reversion and long memory in African stock market prices

Article

DOI: 10.1007/s12197-010-9124-0

Cite this article as:
Anoruo, E. & Gil-Alana, L.A. J Econ Finan (2011) 35: 296. doi:10.1007/s12197-010-9124-0

Abstract

We examine the behavior of stock market prices in several African countries by means of fractionally integrated techniques. In doing so, we can test for mean reversion in these markets. Our results can be summarized as follows: we cannot find evidence of mean reversion in any single market, and evidence of long memory returns (i.e., orders of integration above 1 in the logged stock prices) is obtained in the cases of Egypt and Nigeria, and, in a lesser extent in Tunisia, Morocco and Kenya. Permitting the existence of a structural change, the break dates take place in the earlier 2000s in the majority of the cases, and evidence of mean reversion seems to have taken place in the periods before the breaks in most of the countries. If we focus on the absolute and squared returns, evidence of long memory is obtained in Nigeria and Egypt. Thus, for these two countries, a long memory model incorporating positive fractional degrees of integration in both the level and the volatility process should be considered.

Keywords

Long Memory Fractional Integration Stock Market Returns 

JEL Classification

C4 F3 G15 

Copyright information

© Springer Science+Business Media, LLC 2010

Authors and Affiliations

  1. 1.Coppin State UniversityBaltimoreUSA
  2. 2.Faculty of EconomicsUniversity of NavarraPamplonaSpain