Recent research based on variance ratios and multiperiod-return autocorrelations concludes that the stock market exhibits mean reversion in the sense that a return in excess of the average tends to be followed by partially offsetting returns in the opposite direction. Dividing history into...

Recent research based on variance ratios and multiperiod-return autocorrelations concludes that the stock market exhibits mean reversion in the sense that a return in excess of the average tends to be followed by partially offsetting returns in the opposite direction. Dividing history into...

This paper reexamines the empirical evidence for mean-reverting behavior in stock prices. Comparison of data before and after World War II shows that mean reversion is entirely a prewar phenomenon. Using randomization methods to calculate significance levels, the authors find that the full...