Mean Reversion in International Stock Markets: An Empirical Analysis of the 20th Century

This paper analyzes mean reversion in international stock markets during the period 1900-2008, using annual data. Our panel of stock indexes in seventeen developed countries, covering a time span of more than a century, allows us to analyze in detail the dynamics of the mean-reversion process. In the period 1900-2008 it takes stock prices about 13.8 years, on average, to absorb half of a shock. However, using a rolling-window approach we establish large fluctuations in the speed of mean reversion over time. The highest mean reversion speed is found for the period including the Great Depression and the start of World War II. Furthermore, the early years of the Cold War and the period covering the Oil Crisis of 1973, the Energy Crisis of 1979 and Black Monday in 1987 are also characterized by relatively fast mean reversion. Overall, we document half-lives ranging from a minimum of 2.1 years to a maximum of 23.8 years. In a substantial number of time periods no significant mean reversion is found at all, which underlines the fact that the choice of data sample contributes substantially to the evidence in favor of mean reversion. Our results suggest that the speed at which stocks revert to their fundamental value is higher in periods of high economic uncertainty, caused by major economic and political events.mean reversion, market efficiency

Planning as a learning process : a strategy for planning land use programmes at local level with special reference to the uplands of Java

IntroductionThe challenge for land use management in the nineties is to initiate a people- centered development process which creates opportunities for local people to make their own choices about which development strategy to follow. This need is felt in particular for upland areas where government initiated blue- print programmes for land use management have a record of failure. The major reason is that these programmes are often not adjusted to cope with the complexity and diversity of the uplands. Land use management encompasses both short-term and longterm benefits and is confronted with rapid changes. The differing role of private, state and communal lands in combination with a complex system of control and utilization makes land use management difficult to fully understand. This study responds with the development of an alternative strategy for planning sustainable land use programmes at local level and has the following objectives:- to develop a strategic model for people-centered planning of sustainable land use programmes;- to develop a flexible planning method that can serve as land use management tool at local level;- to test the feasibility of the strategy for the uplands of East Java, Indonesia.Strategic modelThe two major principles of the strategic model are:- Programmes are planned and implemented through a learning process in a local and organizational dimension. The local dimension includes a learning process of planning, implementing and monitoring of small scale programmes. The planning process is short, but planned interventions are regularly adjusted based on new insights and changing conditions. In the organizational dimension the learning process proceeds through three different phases of trial, development and expansion. In this dimension, the government can learn how to manage the strategy of implementing local level planning and how to change attitudes, norms and organizational competence of organizations in order to do so. This dimension embraces local, regional and national governments.- Three major variables have to be considered in programme planning: land use system; interventions and organizations. Sustainable land use programmes are only possible if a good fit between these variables is achieved.In the strategic model these two principles are combined; a fit between the variables is achieved through a learning process. Because achieving a fit between the three variables is a complicated matter, it requires a phased approach which consists of the following three steps: a trial phase, a development phase and an expansion phase. In the trial phase, the focus is on achieving a fit between interventions and land use system in the local dimension. This is achieved through the implementation of trial cases in local level planning in which villagers, field workers of organizations and local leaders become acquainted with this new approach of planning sustainable land use programmes at a local level. In the development phase, attention is focused on achieving a fit between organizations and land use system. Through the development of human resources and extension processes the skills and attitudes of those involved may gradually change to become more people-oriented. In the expansion phase the focus is on achieving a fit between interventions and organization. In this phase the planning approach is accepted and applied at a national level. Changes in government structures and procedures, such as decentralization and strengthening of local leadership need to be achieved. By dividing the process into phases, the complex problems associated with planning sustainable land use become manageable, and step by step the ultimate goal of achieving a fit between all three variables can be reached.Planning methodIn order to reach an optimal fit between the three variables of the strategic model in the trial phase, a planning method should be applied to collect and analyse data that can be transformed into the design of effective programmes. No 'off-the-peg' planning method is available, instead a combination of existing approaches, methods and techniques is needed.Three development approaches can be distinguished to this end: planning of land use development; extension approaches and project management approaches. Generally speaking, each approach covers a different side of the strategic model. Land use development focuses on achieving a fit between interventions and land use system; extension processes can be used in achieving a fit between land use system and organizations; and the fit between interventions and organizations can be accomplished with the help of project management techniques.For planning land use development in the trial phase a number of current methods and techniques are discussed. These are Farming System Analysis, Land Evaluation, Agroecosystem Analysis, Landscape Planning, Rapid Rural Appraisal and Gender Analysis. The criteria set by the strategic model determine which aspects of these present planning methods and techniques are useful for the development of a new planning method. None of these methods and techniques as such are ideal as an operational planning method for realizing the first phase of the strategic model. A synthesis of all useful features into a new land use planning method is proposed.For the trial phase the focus is on planning land use development while opportunities to develop extension processes and to influence project management are limited. Therefore plans should basically be tailored to the existing competence of organizations. Within these limitations some attention can be paid to extension processes and management techniques by introducing an additional step to land use planning, called programming which includes the preparation of a detailed design and a programme planning matrix.Planning environment on JavaThe environment for the planning of land use development programmes is diverse and complex in the uplands of East Java. Farmers react to the wide diversity in the land use system by developing a large number of different land use strategies. By contrast, government organizations use standardized programmes with uniform and mostly inflexible procedures for planning and implementation. Village development planning procedures exist, but do not yet function properly. Local organizations responsible for village development planning do not yet possess the skills and capability to develop such plans, and centrally organized sectoral agencies still dominate this 'bottom-up' planning process. The dominance of the central government can be explained by the incorporation of a number of socio-cultural features in their policy, such as the principles of 'sole authority', consensus, and harmony. The government uses these principles to encapsulate autonomous local organizations in the government administration, orienting the local leaders more to government rules and procedures than to the needs of the local population.This orientation towards government administration has two major implications for the current planning of interventions. Firstly, the interventions are adjusted to the competence of implementing organizations rather than letting the organizations develop their competence to implement the tasks of locally planned interventions. Secondly little more than lip-service is paid to the participation of villagers in planning.Notwithstanding these shortcomings in the present village development planning process, official government policy has some room for improvement. This may allow for a more balanced planning process new approach.Secondly, constraints which can be expected while applying the model on Java are described. The feasibility of the trial phase of the strategy is evaluated based on experiences with implementing the trial cases on Java. In this evaluation the question is raised as to what extent the results of local level planning on Java can respond to the research objectives as formulated at the start of this study. No experience has been gained as yet with implementing the development and expansion phase. One programme that provides some valuable lessons for the feasibility of the phased learning process of the strategic model is the Java Social Forestry Programme (JSFP). This programme has followed a comparable phasing strategy and has already reached the expansion phase.Conclusions and policy recommendationsThis evaluation results in a number of conclusions on conditions to be fulfilled for successful implementation of the strategy. To sum up:- although the strategy is aimed at the local level, it cannot be realized at local level only as it requires involvement of regional and national government organizations to deal with changing communication processes and organizational structure;- objectives in village development planning should be set realistically in the knowledge that short term results will always dominate long term benefits, tangible results will get higher priority than social changes, while top-down influences from sectoral agencies will prevail;- in addressing the organizational dimension a choice should be made between following an approach of 'decentralized trial cases' versus 'centrally guided bottom-up process'. Whichever strategy is chosen it needs careful management to avoid difficulties in institutionalization or a too rapid expansion respectively;- it is necessary for the government to be shown better results in terms of sustainable land use development programmes at local level implemented by highly committed villagers. Only then may they be motivated to accept such a participatory approach at the cost of losing some power or consensus;- implementing a participatory planning process is an initially slow process, to which government agencies need to be committed.These conditions are translated into a number of policy recommendations for donor agencies and governments pertaining to: long-term and continuous commitment; development of the management capacity and motivation of people involved; and strengthening the competence of a government organization for responsive governance.Experiences in Java have illustrated the importance of congruence between the design of land use interventions; the development of communication processes and the development of organizational competence. The whole range of actors involved who strive for sustainable land use - from villagers to programme managers - will have to contribute to achieving this fit. They will only be able so when they view PLANNING AS A LEARNING PROCESS