Mean reversion of tourism stock prices

• Main Authors: Ching-Yi Chen, 陳靜儀
• Other Authors: Ming-Hsiang Chen
• Format: Others
• Language: en_US
• Published: 2006
• Online Access: http://ndltd.ncl.edu.tw/handle/74896231382606432367

碩士 === 國立中正大學 === 財務金融所 === 94 === This paper tested the mean reversion behavior of stock prices of tourism and several industry sectors towards their fundamental values, namely earnings per share (EPS) and dividend per share (DPS), over the period from August 1995 to February 2004. Empirical results based on cointegration tests generally showed that DPS is not a good proxy of fundamental values of stock prices in all sectors, while EPS can serve as a good proxy of fundamental values of stock prices only in the tourism and construction sectors. It is further found that although tourism stock prices have diverged away from their fundamental values from time to time, there exists an error correction mechanism in the market, which can adjust tourism stock prices to mean revert towards their fundamental values. This finding suggests that stock investors could pay more attention to the underlying performance of tourism stocks in terms of their earnings per share.