Mean Reversion in Equilibrium Asset Prices: Evidence from the Futures Term Structure

Hendrik Bessembinder, JAY F. COUGHENOUR, PAUL J. SEGUIN, MARGARET MONROE SMOLLER

Research output: Contribution to journalArticlepeer-review

202 Scopus citations

Abstract

We use the term structure of futures prices to test whether investors anticipate mean reversion in spot asset prices. The empirical results indicate mean reversion in each market we examine. For agricultural commodities and crude oil the magnitude of the estimated mean reversion is large; for example, point estimates indicate that 44 percent of a typical spot oil price shock is expected to be reversed over the subsequent eight months. For metals, the degree of mean reversion is substantially less, but still statistically significant. We detect only weak evidence of mean reversion in financial asset prices. 1995 The American Finance Association

Original languageEnglish (US)
Pages (from-to)361-375
Number of pages15
JournalJournal of Finance
Volume50
Issue number1
DOIs
StatePublished - 1995
Externally publishedYes

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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