Mean reversion on selected stocks in the Philippine stock market from 1998-2011

• Main Authors: Choi, Sung Ho, Kim, Woo Young, Shin, Bora, Villasana, Erika Dolor H., Rivera, John Paolo, panel chair
• Format: text
• Language: English
• Published: Animo Repository 2012
• Subjects: Stocks > Philippines; Stock exchanges > Philippines
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/9042
• Institution: De La Salle University

Predictability of stock movement has been studied in various methods. One method to analyze the movement of stock returns is to study the mean reversion phenomenon. Tendency of the returns of stocks to revert to a central value along the fluctuation is called mean reversion. Existence of the mean reverting behavior of stock return has been proven in many developed countries like member countries of OECD (Spierdik, Bikker & Hoek, 2010). The primary objective of this research is to determine the existence of mean reversion in the Philippine stock market. Analysis used data of the stock returns of 13 selected stocks from Philippine Stock Exchange index period covering 1998 to 2011. Researchers performed risk and return profiling and regression analysis. Mean reversion phenomenon is statistically explained by negative autocorrelation of stock return but the findings of this paper rather showed positive autocorrelation at 5 percent significance level. Base journal for this study had proven mean reversion behavior in Philippine stock market during 1980 to 1995. However, this paper was able to prove the absence of mean reversion in the Philippine stock market during 1998 to 2011.