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Apr
5
comment Using variance ratios to test for mean reversion
Ok, I'm satisfied now. Thanks!
Apr
5
comment Using variance ratios to test for mean reversion
In the abstract of the same paper: "It demonstrates that variance ratios are among the most powerful tests for detecting mean reversion in stock prices."
Apr
5
comment Using variance ratios to test for mean reversion
I tend to agree with you. However, I found the following quote: "The mean values of the individual firm variance ratios are shown in Table 5. They suggest some long-horizon mean reversion for individual stock prices." Page 19 of albany.edu/faculty/faugere/PhDcourse/meanreversion1.pdf I'm having trouble understanding why certain variance ratios would imply mean reversion.
Apr
1
comment Does the geometric Ornstein-Uhlenbeck process have stationary variance?
I agree, but everyone seems to call the process stationary, even using the geometric process. My main question is whether the variance term that I "made up" is an appropriate calculation. It fits the variance of a simulated series fairly closely.
Apr
1
comment Does the geometric Ornstein-Uhlenbeck process have stationary variance?
quant.stackexchange.com/a/4932/3043, It's a different simulation equation than I'm using, but it's the same stochastic process.