An Investigation On the Presence of Mean Reversion in Stock Prices in Tehran Stock Exchange


Financial Scientists have always been eager to distinguish between
whether the price series could be random walk (unit root) or mean
reverting processes.By a random walk we mean that accruing shocks
to the system have permanent impacts and prices do not revert to their
previous trend path, in addition, regarding to random walk processes
the price series volatility could increase with out any limit or
restrictions. In this survey, using the time series of price and utilizing
Augmented Dickey-Fuller Test we have attempted to investigate a
sample of selected firms, listed in Tehran stock exchange. To start we
have developed a simple definition of mean reversion and tested the
presence of such a qualification in price series of the sample.