Short-Term Autocorrelation in Australian Equities

Clive Gaunt, Philip Gray

Research output: Contribution to journalArticleResearchpeer-review

28 Citations (Scopus)

Abstract

This paper examines the statistical and economic significance of short-term autocorrelation in Australian equities. We document large negative first-order autocorrelation in individual stock returns. Preliminary results suggest this autocorrelation is economically significant, as two simple trading strategies based on the autocorrelation structure appear to yield large risk-adjusted returns. Further analysis, however, shows that these results are driven by the inclusion of smallcapitalisation and low-priced stocks which are vulnerable to a number of market-microstructure-related problems. After revising the dataset to mitigate these problems, little evidence of economic significance remains.

Original languageEnglish
Pages (from-to)97-117
Number of pages21
JournalAustralian Journal of Management
Volume28
Issue number1
DOIs
Publication statusPublished - 1 Jan 2003

Keywords

  • AUTOCORRELATION
  • ECONOMIC SIGNIFICANCE
  • MARKET EFFICIENCY
  • RANDOM WALK HYPOTHESIS

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