Are Korean Industry-Sorted Portfolios Mean Reverting?

Abstract

This paper tests the weak-form efficient market hypothesis for Korean industry-sorted portfolios. Based on a panel variance ratio approach, we find significant mean reversion of stock returns over long horizons in the pre Asian currency crisis period but little evidence in the post-crisis period. Our empirical findings are consistent with the fact that Korea accelerated its integration with international financial market by implementing extensive capital liberalization since the crisis.

Keywords

• Mean Reverting
• Panel Variance Ratio Tests
• Efficient Market Hypothesis
• Industry- Sorted Stock Price Indexes