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Serial and cross-correlation in the Spanish Stock Market returns

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Author Info

  • Javier DePeña

    ()

  • Luis A. Gil-Alana

    ()
    (School of Economics and Business Administration, University of Navarra)

Abstract

In this paper, we test if stock index prices follow random walks in the Spanish Stock Market by means of variance ratios. We find strong evidence of positive autocorrelation for both IGBM and IBEX35 daily returns until 1977, but not after that date. Although weekly and monthly index positive autocorrelations are not significant during the years 1972-2002, there is significant positive monthly cross-correlation between portfolios based on size. In particular, large stock portfolios seem to lead to the small stock ones.

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File URL: http://www.unav.es/facultad/econom/files/workingpapersmodule/@random437a048e3df62/1132243850_wp0203.pdf
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Bibliographic Info

Paper provided by School of Economics and Business Administration, University of Navarra in its series Faculty Working Papers with number 02/03.

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Length: 24 pages pages
Date of creation: Jan 2003
Date of revision:
Publication status: Published, Global Finance Journal, 2007, vol. 18: pp. 84-103.
Handle: RePEc:una:unccee:wp0203

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Web page: http://www.unav.es/facultad/econom

Related research

Keywords: Market efficiency; random walk; variance ratio; cross-correlation;

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  1. Scholes, Myron & Williams, Joseph, 1977. "Estimating betas from nonsynchronous data," Journal of Financial Economics, Elsevier, vol. 5(3), pages 309-327, December.
  2. Badrinath, S G & Kale, Jayant R & Noe, Thomas H, 1995. "Of Shepherds, Sheep, and the Cross-autocorrelations in Equity Returns," Review of Financial Studies, Society for Financial Studies, vol. 8(2), pages 401-30.
  3. Kadlec, Gregory B & Patterson, Douglas M, 1999. "A Transactions Data Analysis of Nonsynchronous Trading," Review of Financial Studies, Society for Financial Studies, vol. 12(3), pages 609-30.
  4. Dimson, Elroy, 1979. "Risk measurement when shares are subject to infrequent trading," Journal of Financial Economics, Elsevier, vol. 7(2), pages 197-226, June.
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