Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/259836 
Year of Publication: 
2000
Series/Report no.: 
Working Paper No. 2000:8
Publisher: 
Lund University, School of Economics and Management, Department of Economics, Lund
Abstract: 
In this paper we use a Bayesian approach to test for mean reversion in the Swedish stock market on monthly data 1918-1998. By simply account for the heteroscedasticty of the data with a two state hidden Markov model of normal distributions and taking estimation bias into account via Gibbs sampling we can find no support of mean reversion. This is a contradiction to previous result from Sweden. Our findings suggest that the Swedish stock market can be characterized by two regimes, a tranquil and a volatile, and within the regimes the stock market is random. This finding of randomness is in line with recent evidence for the U.S stock market.
Subjects: 
Market efficency
variance ratio
Gibbs sampling
hidden markov Chains
JEL: 
C11
C15
G10
Document Type: 
Working Paper

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