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Hello EViews forum! I'm trying to calculate the half-life of mean reversion of daily stockprices by the formula of T1/2 = ln(2)/k, where k is the speed of mean reversion. But to solve for k I need to do a calibration/estimation of the Ornstein-Uhlenbeck by the Least Sqare method. I tried following t...

What I want to know is how to estimate the Ornstein-Uhlenbeck process for a time-series data of stock prices. Anyone please help?

Hi!

I'm wondering how to calculate the speed of mean reversion. I've heard that the half-life formula is t = ln(0.5)/ln(abs(b)).

But how do you use it in practice? I'm quite lost here.

Best regards,

Maurelius

OK. So first, when the p-values are under 5% significance you can reject that it is a Martingale. Second, you look at the variance ratio and see if it's greater or less than one to interpret it as mean reverting or mean averting?

Thank you so much for this EViews Glenn! You are right, you can't really say that it's mean-reverting just because the null hypothesis of a Martingale is rejected. But when judging by the result, are you looking at the probability-values or variance ratios? I for one thought that the variance ratio ...

Thank you so much for your help EViews Glenn, One last thing. Would you care to help me interpret this variance ratio test result? Null Hypothesis: Log ATLAS_COPCO_B is a martingale Date: 04/23/14 Time: 09:59 Sample: 1 3560 Included observations: 3557 (after adjustments) Heteroskedasticity robust st...

Thanks for your reply.

I have a few follow-up questions;

1. To calculate variance ratio test do we need to have the daily data return instead of daily closing price?

2. Do we need to logarithm the daily prices to perform the variance ratio test?

Thanks for the answer.

Since I'm all new to this, would you care to explain more in detail and easy reading what these "Test periods" actually are?

Would really appreciate it.

Hi! I'm doing a study on whether a stock market is under random walk or mean reverting. I've heard that the variance ratio test is a great tool to help you with this. The only problem I have is how to choose the "Test periods". The default is "2 4 8 16". How do I decide this? Wor...

Please, anyone who can help me with this? I really need to know and I would really appreciate if anyone could tell me.

So after a lot of reading on the topic I've managed to figure out the step-by-step test for random walk with trend+intercept, intercept only or none. But the big question now is; if I can reject the null hypothesis, does that automatically mean that the time series are mean reverting? Or how should ...

Hi! I am a student and I'm doing a study whether the Swedish stock market are mean reverting or "follows" a random walk. I found this forum when searching for help and it was very helpful, but there's still a few questionmarks that needs to be cleared. Since I'm quite new to all of this it...