Allaudeen Hameed (National University of Singapore) Yuanto Kusnadi (Hong Kong University of Science and Technology)
Abstract
We show that changes in market conditions significantly affect cross-autocorrelations and speed of adjustment in weekly stock returns. We find significant positive cross-autocorrelations between weekly returns on a portfolio of small firms and lagged large-firm portfolio returns only when the lagged aggregate market has experienced a decline in value. These positive-return cross-autocorrelations are also associated with lower abnormal portfolio trading volume and greater delays in the adjustment of individual stock prices to (negative) market-wide information, particularly for small firms. The effect of lagged market states cannot be explained by market microstructure biases such as nonsynchronous trading or thin trading.
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Article provided by University of Chicago Press in its journal Journal of Business.
Volume (Year): 79 (2006) Issue (Month): 6 (November) Pages: 3029-3056 Download reference. The following formats are available: HTML
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