TY  - JOUR
AU  - Cecchetti,Stephen G.
AU  - Lam,Pok-sang
AU  - Mark,Nelson C.
TI  - Mean Reversion in Equilibrium Asset Prices
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2762
PY  - 1990
Y2  - July 1990
UR  - http://www.nber.org/papers/w2762
L1  - http://www.nber.org/papers/w2762.pdf
N1  - Author contact info:
Stephen G. Cecchetti
Monetary and Economic Department
Bank for International Settlements
Centralbahnplatz 2
4002 Basel
SWITZERLAND
Tel: +41 61 280 8350
Fax: +41 61 280 9113
E-Mail: stephen.cecchetti@bis.org

Pok-Sang Lam
Department of Economics
Ohio State University
1945 North High Street
Columbus, OH   43210-1172
Tel: 614/292-6702

Nelson Mark
Department of Economics
University of Notre Dame
434 Flanner
Notre Dame, IN  46556
Tel: 574/631-0518
Fax: 574/631-4783
E-Mail: nmark@nd.edu
AB  - Recent empirical studies have found that stock returns contain substantial negative serial correlation at long horizons. We examine this finding with a series of Monte Carlo simulations in order to demonstrate that it is consistent with an equilibrium model of asset pricing. When investors display only a moderate degree of risk aversion, commonly used measures of mean reversion in stock prices calculated from actual returns data nearly always lie within a 60 percent confidence interval of the median of the Monte Carlo distributions. From this evidence, we conclude that the degree of serial correlation in the data could plausibly have been generated by our model.
ER  -